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The language of the preamble describing this transition relief seems to envision employers that did not offer coverage before: "Except as otherwise provided in this paragraph (3), during the coverage maintenance period the employer does not eliminate or materially reduce the health coverage, if any, it offered as of February 9, 2014." (emphasis added). The preamble also says this: "The Treasury Department and the IRS understand that application of section 4980H will involve changes for applicable large employers that did not previously offer coverage, or that did not offer affordable, minimum value coverage. A large percentage of those employers are in the smaller size range, such as those with fewer than 100 full-time employees (including FTEs)." (emphasis added)

I don't think Lou S. was emphatic enough. This is a very very very incorrect statement. Also, make sure the plan is not top-heavy before you do away with the safe harbor. (I presume you have safe harbor match already). IF the owners have been socking away the max for 15 years and you have high turnover among lower paid employees, I could easily see where your plan could be top-heavy.

Would switching from the non-elective to the match safe harbor solve the problem or are they concerned about the NHCEs suddening deferring? If they insist on dropping safe harbor how about using prior year testing and proactively limiting HCE deferral rates to avoid/eliminate refunds?

Wow, interesting question. FWIW, I'd include it as compensation for 2013, use the 2013 deferral election, and ADP test it for 2013. (As an aside, many docs define the compensation for a plan year as W-2 for the determination year - the determination year being the plan year in the absence of any other election). While I recognize the 415 issues that must be considered, I think the document language (if defined as above) provides sufficient justification not to re-do history going back possibly several years. It's also more "reasonable" as far as I'm concerned. The potential problems and expense involved in retesting, possibly failing, top heavy, HC determinations, etc - you name it, are so ridiculous that I'd absolutely avoid it if there's any reasonably justifiable alternative. In fact, even if the document language is silent, which seems unlikely to me, I think I'd still do it based on 2013. That's my story and I'm sticking to it. Until I change my so-called mind... P.S. - I sincerely hope I never have to deal with this in a real life situation!