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I'll just add that especially in the small plan market, the SHNE is VERY commonly used instead of the match as it does count toward satisfying the "gateway" contribution, (if gateway is required) whereas the match does not.

And anyway, if there really was a withdrawal due from the ACP test, and the HCE's already been paid, then the Plan Administrator needs to adjust the Forms 1099-R to indicate one amount paid as a corrective distribution, separate from the rest. And the usual "gotta get it out of the IRA if that's where it's already gone" caveats.

As @justanotheradmin notes, you need more information about the DFVCP and your role. Here are some things to consider: Does the plan sponsor have in hand the Schedule SB Actuarial Information and all of the related attachments for each plan year? If not, who will coordinate gathering this information from the actuary? Does the plan require an audit for any of the plan years? If yes, does the plan sponsor have in hand the completed audit report for each year? If not, what role if any, might you have in working with the auditors? When filing retroactively under DFVCP for more than 2 years past due, the plan will have to use a current year form to report the earlier years AND will have to use the prior versions of any Schedules that needed to be attached to the original filings for each year. See https://www.askebsa.dol.gov/FormSelector/ to get a flavor for how this works. In some ways, this is the tip of the iceberg, so you may get drawn into things like determining if appropriate fidelity bond coverage was in place, or tracking participant counts, or filing Form 8955-SSA, ... A reasonable fee not based solely on hours spent, but also includes recognition of the knowledge and expertise you bring to the process.

Ms Emily, I don’t have the stats only opinions. 1. SHNE likely doesn’t offer the same incentive as SHM. 2. People shouldn’t need an incentive to help themselves. 3. We have to design plans to accomplish what the owners need as well. 4. Congress (and IRS) made the rules. We just have to live with them. 5. I wish Congress (and IRS) would stop changing the blanking rules so often.

SH Match can't have an allocation condition. Are you saying there is both SH match and discretionary match? I'm confused by your fact pattern.

Agree with all of the above - usually see SHNE when plan also has cross-tested PS and if in combination with a CB plan. When owner is just looking to defer maximum with as little employee cost as possible, then it's always the SHM. The situations in between then usually depend on the owner's or owners' attitude (and pockets) toward employee benefits.

And to Bill's points 4 and 5 above: whenever I start feeling like wallowing in self-pity, I look at the first line of IRC 401(a)(4), and then curse the IRS for the incredible volume of regulations issued for this requirement: (4) if the contributions or benefits provided under the plan do not discriminate in favor of highly compensated employees (within the meaning of section 414(q)). Of course, the flip side of the coin is that without all the onerous regulations, I'd be standing in line for the soup kitchen...

I agree, Emily S. My experience is that SHNE is used when the sponsor wants all eligible employees to receive a contribution, regardless of whether or not they can or wish to save their own money.

I think that's in the language of your particular plan, rather than a blanket rule.

What testing would cause a refund to the HCE if the plan is safe harbor?

From the preamble to the proposed catch-up regulations, released today: This is found in a footnote on page 15 of the 57-page document. https://public-inspection.federalregister.gov/2025-00350.pdf

Here’s Internal Revenue Code § 45E http://uscode.house.gov/view.xhtml?req=(title:26 section:45E edition:prelim) OR (granuleid:USC-prelim-title26-section45E)&f=treesort&edition=prelim&num=0&jumpTo=true and § 408(p)(2)(C)(i) http://uscode.house.gov/view.xhtml?req=(title:26 section:408 edition:prelim) OR (granuleid:USC-prelim-title26-section408)&f=treesort&edition=prelim&num=0&jumpTo=true which defines an eligible employer for § 45E. The measure is not about participants; it’s about a number of employees who received at least $5,000 in compensation from the employer for the preceding year. Consider also that § 45E(e)(1) and § 414 include provisions about persons treated as one employer. If a tax credit might be unavailable, consider whether the participants might bear plan-administration expenses.