Many thanks! The intent is simply to add vesting to HCEs, not give them a different match percentage. So I can see where ADP is satisfied. My concern is with ACP. The document permits excluding HCEs, with the exact language of the example above, but I am concerned that a vested match is not an "ADP test safe harbor contribution"
If the HCEs have vesting and last day, they are essentially getting a discretionary match - which I don't think qualifies for ACP Safe Harbor. For example, let's assume only 40% of NHCEs participate and get the 4% match. The average NHCE test percentage is 1.6%, so the higher ACP limit for HCEs is 1.6% +2 = 3.6%.
If we give HCEs the same 4% (discretionary) match and all participate, their average is 4%. Since HCE match of 4% is greater than 3.6%, does ACP fail? In other words, the HCEs don't get "credit" for the plan being Safe Harbor since it is only ADP Safe Harbor, yet still subject to full ACP testing?
