In regards to the new safe harbor rule effective 1/1/99 that allows a co to match 100% on first 3% and 50% on the next two percent and not be subject the ADP/ACP testing, if the co. contributes 100% on the first 4%, would this satisfy the safe harbor?

Yes. If the aggregate amount of matching contributions under an alternative formula at any given rate of salary deferrals is at least equal to 100% of the first 3% deferred and 50% of the deferral between 3% and 5%, then the alternative formula will satisfy the safe harbor. However, an alternative formula will not satisfy the safe harbor if the rate of matching increases as the rate of deferrals increases (ie. 100% of the first 3% and 125% of the deferrals between 3% and 5%).

If a 401(k) plan matches deferrals in excess of 6% of compensation, the safe harbor no longer applies to the matching contribution, and those contributions together with any after-tax contributions are subject to discrimination testing. However, the safe harbor still applies to the salary deferral part of the plan.

Please note that the safe harbor requirements do not allow the "last day rule" or the requirement to complete 1,000 hours of service during the plan year to receive the match.

Any such safe harbor match contributions must also be 100% vested and subject to 401(k) withdrawal restrictions.

When applying the safe harbor for a matching contribution, can the employer exclude overtime and bonuses from the compensation? The match percentqage will be 100% of the first 4% of elective deferrals. The elective contribution also excludes overtime and bonuses.

Where can I find an example of a 401(k) safe harbor plan notice?

I just had a kind message board participant fax me sample notices. If you'll give me your fax # I'll fax them to you. My e-mail is rvatalaro@earthlink.net