Jump to content
ERISAGal

Safe Harbor 401k and Required Top Heavy Test

Recommended Posts

Have a Safe Harbor 401k plan that allocates a Safe Harbor enhanced match formula (100% up to 4% deferred).  They also allocate a non-elective profit sharing contribution based on integration/permitted disparity and the plan falls into the Top Heavy threshold.  The plan has a 1000 hours of service and last day requirement for receiving an allocation of the additional profit sharing contribution.  EX-Have a participant who is NOT eligible for the allocation of the profit sharing due to the service, but is receiving the Safe Harbor Match because they deferred.  Would this participant also have to receive a Top Heavy minimum allocation or would their Safe Harbor Match satisfy that requirement?

Share this post


Link to post
Share on other sites

The safe harbor match would satisfy the top heavy minimum IF the sh match is equal to or greater than the full year comp x 3%.

  • Thanks 1

Share this post


Link to post
Share on other sites

If they terminated and are not employed on the last day of the plan year they do not have to receive the TH-minimum, assuming you are passing 410(b).

If they are not receiving the allocation because they failed to work 1000 hours but are employed on the the last day of they plan year they need to receive the TH-minimum. The TH-minimum can be off set on a dollar for dollar basis by any matching contributions they received, if the Plan document allows.

  • Thanks 1

Share this post


Link to post
Share on other sites

If a participant did not defer and did not receive a safe harbor match, does the fact that the non-elective profit sharing contribution being allocated based on permitted disparity negate it being able to be used in meeting the 3% Top Heavy minimum requirement for this participant?  I thought I read something about permitted disparity causing a problem with Safe Harbor plans that allocate a profit sharing contribution based on this method.  Thanks!

Share this post


Link to post
Share on other sites

No.

 

5 minutes ago, ERISAGal said:

I thought I read something about permitted disparity causing a problem with Safe Harbor plans that allocate a profit sharing contribution based on this method.

Can't answer this.  :)

  • Thanks 1

Share this post


Link to post
Share on other sites

A plan is top heavy free if no other contributions besides deferral and safe harbor

Since the plan has a ps contribution, then the plan needs to meet the top heavy 

while match can apply to satisfy top heavy, if the participant is terminate they would not get top heavy.

Maybe what you read somewhere refers to the 3% shnec - it can not be integrated - e.g. 3% base and 3% integrated

  • Like 1

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×
×
  • Create New...