Stash026

Sorry about that. Yes, it would still pass the Gateway, as well as 401(a)(4). Testing is not the issue, I just wasn't sure if you were allowed to or if the client had to go back into their pocket for the correcton

Yes, the QNEC would correct for the ADP Test, so the Plan would pass.

I know there are certain circumstances where you can reclassify a discretionary contribution to something else, after the fact, but I can't remember if QNEC is one of them. The plan makes a 4% contribution to all eligible participants, regardless if they defer or not, but unfortunately failed their ADP Test for the first time. Can a portion of the ER contribution be reclassified as a QNEC to correct for the failure?

I have an active participant who has previously had a rollover into the Plan. She doesn't want to take a loan and the plan does not allow for in-service distributions. I don't see anything specific in the document, but would she be allowed to take a distribution out of her rollover account balance? Thanks for everyone's help.

I have a secondary question now. If the client wishes, can they give a Safe Harbor Match to the HCE's, even though there were no NHCE's who contributed? Thanks again for everyone's help.

Yeah, that's a good idea. There was one participant who had participated in prior years, but he actually terminated in 2004, which is why this is the first time we are having this situation for the 2005 Plan Year. Looks like the HCE's get lucky for the Plan Year, then, and have a Safe Harbor Match of $0, then. Thanks for everyone's help, and I am going to look into having the participants signing off that they don't want to participate, just to cover everyone involved. Thanks again.

The document does provide for a Safe Harbor Contribution and yes, a notice was made before the end of the Plan Year. I didn't think it would be as simple as saying that it was a Safe Harbor of $0, however. So, assuming that the document does spell out that formula and the notice was issued, it is as simple as saying a $0 Safe Harbor was made to correct for the failed ADP?

I have a 401(k) Plan with both HCEs and NHCEs eligible to defer, but the only ones who elected to contribute were HCEs. Is it possible to say that the Employer would make a Safe Harbor Contribution of 4% up to 100% of deferrals to all NHCEs, and therefore a Safe Harbor of $0 is required to correct for the failed ADP Test? For some reason, that just seems to easy to me, so I wanted to see if anyone else had handled a situation like this in the past.