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cathyw

403(b) safe harbor match and grandfathered formula

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A 403(b) plan currently has a non-elective employer contribution.  It is proposed to implement a soft freeze on this formula, allowing existing participants to continue to receive the non-elective contribution while new participants will receive a matching contribution.  Can this new contribution be designed as a safe harbor match?  I guess the technical point is can the plan be restructured into two component plans for the different employer contributions that each satisfy 410(b), and then satisfy the safe harbor match requirements by including only those participants eligible for match (i.e., only the new participants)?

Thanks.

 

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safe harbors are supposed to be provided to anyone eligible to defer (at least NHCEs), but it sounds like that is not going to happen 1.401(k)-3(b) [SHNEC] and 1.401(k)-3(c)[SHMAC]

or put another way, we want a free ride on the ADP test but we are only going to give a safe harbor to new ees. the heck with all the other NHCEs. after all, they still get a ps contribution.

for better or for worse there is no 1.401(k)-3(x) Exception to the rule requiring all NHCEs to receive a safe harbor if the plan provides something else instead to some NHCEs 

 

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As a 403(b), only ACP testing would be a concern, but I agree that providing a match only to a subset of participants could not be a safe harbor match. They would have to physically have a new/separate plan for new hires (and pass coverage).

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