cross-tested db/dc combo,

[Guest DOM]

In a cross-tested db/dc combo, 40% of the eligible participants (including NHCE's) are covered under the DB plan. The other 60% of eligibles are in a safe harbor 401k plan, providing a 3% non-elective sh contrib, and 4.5% employer contrib. Further the HCE's in the DB plan make maximum salary deferrals to the 401k plan.

Do the NHCE's in the DB plan get a sh contrib, in the 401k plan? If so, what is the effect on the tax deductibility of total er contribs. to both plans under 404(a)(7) due to overlapping plan membership? On the other hand, can the 3% sh be deemed to be satisfied in the DB plan, specifically through the top-heavy requirement? Finally, should these steps be included in the plan documents?

[Mike Preston]

"In a cross-tested db/dc combo, 40% of the eligible participants (including NHCE's) are covered under the DB plan. The other 60% of eligibles are in a safe harbor 401k plan, providing a 3% non-elective sh contrib, and 4.5% employer contrib. Further the HCE's in the DB plan make maximum salary deferrals to the 401k plan."

The above is unclear. Who is in the k plan? "The other 60%" only? Well, that can't be because there are HCE's in the DB that are also in the 401k.

Care to clarify?

[Guest DOM]

The HCE's who are in the DB plan, or any NHCE's in the DB plan for that matter, have the right to make deferrals into the 401(k) plan. They have no right, however, to any employer contrib, not even SH contrib, in the 401(k) plan.

[Mike Preston]

How can you have NHCE's in a SH 401k plan that are only eligible to defer and aren't eligible for the SH contribution?

[Guest DOM]

I thought I made it clear that all employees in the DB whether HCE or NHCE are eligible to defer in the 401k plan but not eligible for the SH contribution in the 401k plan. Because there can not be overlapping plan participation with respect to ER contributions.

Apparently not. Anyway forget about it!!!

[Mike Preston]

I don't think you can have participants in the 401k plan not eligible for the SH ER contribution. If you do, you don't have a SH 401(k) plan at all. You have a 401(k) plan with a group of people getting a 3% contribution that happens to be 100% vested.

So, I think the answer to your first question is that, yes, in order for the SH 401(k) plan to be a SH harbor 401(k) plan, the NHCE's who are also participating in the DB plan must get the 3% contribution.

The net impact is that 404a7 comes into play and the maximum deductible between the DB contribution and the SH 3% contribution to the SH 401(k) plan is 25% of pay, or if greater, the DB contribution alone.

No, the 3% SH contribution cannot be deemed to be satisfied in the DB plan.

Hence, there is no ability or need to handle this through plan documentation. It is what it is.

[AndyH]

Another wow.

[Tom Poje]

I'd be curious on the document language!

Lets see, there are 40% employees in the DB plan. unless there are more than 50 employees in the DB, just one new hire could cause Minimum Participation failure, or a terminee from the DB plan would produce a failure as well.