The client has an existing 401(k) Safe Harbor Match plan where Key Employees participant. This plan has immediate entry. A Cash Balance plan and a Profit Sharing plan are added, where Key Employees also participate. The Cash Balance and Profit Sharing plans have a one-year wait for eligibility.
Question #1......Since Key EEs participate in all three plans, I believe all three plans are part of the 416 required aggregation group. The 416 required aggregation group is Top Heavy. Does the 401(K) Safe Harbor plan lose the Safe Harbor Top Heavy exemption, and now have to provide 3% of Compensation to those that are in the 401(k) Safe Harbor plan but not yet in the CB or PS plans? I believe the answer is no.
Question #2..... The CB and PS plans only benefit employees of specific job classifications (i.e. dentists, hygienists and technicians), and would satisfy the subjective reasonable classification test. If each plan individually passes the 70% coverage ratio, then I think I'm good and no need to do ABT. However, it's not looking like that's possible and I'm going to need to do ABT. If I need to do ABT, I believe I'm required to pull in the 401(k) deferrals and Safe Harbor Matching contributions. Is this correct?
Question #3..... If the 401(k) Safe Harbor plan is pulled in for ABT, have I blown the Safe Harbor TH exemption and now have to provide a 3% of Compensation TH Minimum to everyone who is in the 401(k) Safe Harbor plan but not yet in the CB or PS plans? I think the answer is yes because now I'm using the deferrals and match for coverage. Side note.... If I include the deferrals and SH match I easily pass ABT, then also easily pass 401(a)(4).
