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Greetings, Bob, and welcome. You asked:

Our retirement plan is changing soon. We are told that the changes are required to maintain qualified status (in light of other changes that are to be made), but for the life of me, I can't figure out why. The details follow:

I'm an employee of a law firm that's structured as a limited liability partnership, with both equity and non-equity partners. The statute says I'm a "highly compensated employee," although my wife might disagree. We have a 401(k) plan to which we can contribute 10% or $10k, which I understand to be the statutory maximum. In addition, for the moment, we have an additional, mandatory, 3% contribution, which permits us to exceed what would otherwise be the limit.

That additional, mandatory, contribution is going away next year. We are told that this is a consequence of a change being made to the partnership's retirement plan, and I've tried to figure out how the one could affect the other, but it's a pozzlement to me. Any (educated) guesses?

That 3% mandatory contribution is probably one the firm must make because your plan is considered "top heavy". A plan becomes top heavy when more than 60% of the benefits go to key employees. When that happens, the firm must make that 3% mandatory contribution to all the other employees. That gets expensive, so that's almost certainly why your firm is changing the plan. By changing the plan, the firm can ensure it's no longer top heavy and the 3% mandatory contribution will disappear.

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