What role do key employees play in a top-heavy 401(k) plan?

In a top-heavy 401(k) plan, key employees play a significant role regarding how benefits are structured and allocated. Typically, a top-heavy plan is one where a significant portion of the plan's assets is held by key employees, which include highly compensated employees, officers, and shareholders. When a plan is classified as top-heavy, specific regulations come into play to ensure that non-key employees are given appropriate benefits.

Due to the plan's structure, key employees may receive additional benefits. The law requires that top-heavy plans provide minimum contributions or benefits to non-key employees to ensure fairness. This means that if a plan is deemed top-heavy, key employees might still receive enhanced benefits, but the plan must also enhance the benefits provided to non-key employees to satisfy regulatory requirements. This balancing act is essential to maintain compliance while ensuring that the key employees still benefit from the plan’s offerings.

The other choices focus on different aspects that are not applicable in the same way. For instance, while non-key employees should ideally represent a broader base to foster fair benefit distribution, they do not make up the majority in a top-heavy plan scenario. Furthermore, contributions to the plan are not exclusive to key employees, and multiple participants contribute. Lastly, the management of investments within