Normally, a 401(k) plan does not require any employer contribution. However, if the plan becomes top heavy, then an employer contribution of 3% of compensation may be required. A top-heavy plan is a plan in which 60% of the benefits/assets for the preceding five years belong to key employees. Generally, a key employee is an employee who meets one of the following criteria: An officer earning $150,000 (as adjusted for inflation) or more; More than 5% owner (including family members of a 5% owner); or A 1% owner earning $150,000 or more. If a key employee defers into the 401(k) plan when it is top heavy, the employer is required to make a 3% (of compensation) top heavy minimum contribution for all non-key employees who are active participants in the plan at year-end. A profit sharing or safe-harbor contribution of at least 3% of pay will satisfy the top-heavy minimum. Matching contributions will count towards the top-heavy minimum. Attention Silicon Valley, Internet, or other start-up companies: Employees who have stock options are considered to own the stock for which they have vested options. This applies regardless of whether the employee exercises the option. back to top