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You guys are missing my point. When testing based on permitted disparity the 3% SH can not take advantage of the integration. That same amount as a regular employer profit sharing contribution can do so. All other things being equal, the HCE's can get more dollars as employer profit sharing than as SH.

k2retire- I am aware of that (an NHCE deferring more would get something extra), but that still leaves you some NHCEs who are, I guess, "out of luck". and despite that, the HCEs get the free ride, again, despite the fact comp test failed. no further penalty. so for example, if all NHCEs deferred 4% they received 4% match. now plan fails comp test. no correction needed because they still received 100% of deferral, despite the fact they couldn't defer 4% of total comp. to me that just smells bad.

Betcha Dave can get it back.

I assume that they are also providing a cross-tested allocation. Typically the safe harbor contribution is "made up" in that allocation. (e.g. an HCE would get a 9% allocation or whatever the general test would support). The advantage to excluding HCEs is in situations where you would find out the owner's son joined the company after the fact and it would negatively impact the cross-tested allocation.

the process was probably created by a committee - and either there was no actuary on the committee or the actuary missed the meeting the day this was decided. So the actuary ended up with the monkey on his or her back.

Yes. From the responses above, perhaps the industry standard is to file and their perception of the industry standard is askew.