Hi,
I'm going to apologize ahead of time. I'm a small business owner, and in no way a benefits expert.
Our company has only 8 people in the plan. 5 of those 8 have ownership above 5% and thus are HCE as I understand it. One more has a salary in excess of 150k, thus also an HCE. We offer a 100% on the first 3% and 50% on the next 2% for our match. We also have a profit sharing component to the plan.
My understanding is that because we have the safe harbor plan, we're exempt from testing (ADP, top-heavy, etc) for the primary 401k. However, our TPA is informing us that there is testing associated with the profit sharing component. Is this correct? We're looking to max out our portion as owners, and provide a different but equal amount to the two non-hce's and a 3rd amount to the one HCE that is a non-owner.
My further understanding of the profit share is that we can only "share" up to 25% of the total compensation of all eligible employees, but that the money is pooled. eg, 8 employees each making 100k, we would have no more than 200K that could be put into the profit share portion, and no single employee could crest the 69k combined threshold (unless with catchup contribution).
I'm hopeful someone here can provide some additional insight for me. If we make a "profit share contribution" to all employees, HCE and Non, are we subject to testing? If so, is there anywhere where I can plug in our numbers and understand my options? Additionally, do we need to provide the same to all non-owner or non-hce's?
Thanks for helping me through this. Not my forte, and I struggle at times with our TPA's ability to explain our options and the laws we must follow.
