A plan sponsor did not make their total Top Heavy contribution for a PYE in ‘98. As TPA, our firm completed Form 5330 for them and instructed them to deposit the additional amount and file the Form 5330 with the IRS. The plan sponsor signed the form in 1999 and sent it to the IRS along with the penalty. The IRS is now asking for the date the deposit was made (Part IX- Form 5330). In conversation with the plan sponsor, it appears the plan sponsor never deposited the amount to make up the Top Heavy contribution. What should we as TPA do now? What should the plan sponsor do?

It seems to me that the plan is not qualified for the 98 plan year since a top heavy contribution was necessary and that ou should recommend a CAP submission (assuming the plan is eligible). Because the top heavy contribution was not made by the deadline in 1.415-6(B)(7) it can not be counted as an annual addition for the 98 plan year.