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Hello everyone! I have a client that is contributing only the 3% Safe Harbor Nonelective contribution to their plan. There are no other employer contributions to be allocated, and forfeitures were used to reduce plan expenses. Based on all information I could find, and from my past experience, this scenario allows the plan to be exempt from all top-heavy minimum requirements. However, there is one wrinkle that is affecting my judgement. The plan document is written so HCEs are not required to receive Safe Harbor contributions (keep in mind they are eligible to receive the Safe Harbor in the sense they met the eligibility requirements and entered the plan for Safe Harbor contributions, and are not strictly excluded from this portion of the plan). This selection was made a few years ago, so the plan has not contributed the Safe Harbor 3% Nonelective for any HCEs (both Non-Key and Key) for quite some time. This is the first year in a while where the client decided to not allocate discretionary profit sharing in addition to the Safe Harbor, so the Top Heavy exemption can possibly come into play for the plan year. That being said, since the HCEs that are Non-Key are not receiving any Safe Harbor contribution, does the plan lose their Top Heavy exemption, and would this group have to receive a 3% Top Heavy Minimum? I can't confirm anywhere whether the exemption still holds up since the client is strictly allocating the Safe Harbor nonelective to the plan. Any help is greatly appreciated (a regulation cite or excerpt from the ERISA Outline Book would really help as well). Thanks! Wickedp1

I have a plan that gave the SHNEC notice for 2013. They renetly went out of business. Since they committed to the 2013 contribution its my understanding that there is no way around it, right? If it's not made, its an operation failure and disqualifying event. The plan is also top heavy for 2013. So if the plan wasn't safe harbor the 3% top heavy would would need to be made or it would be a top heavy viloation and also a disqualifying.... Anyone else ever have a plan where the safe harbor contribution was never funded?

First time poster, so please bear with me....... This is a calendar year plan. The plan is a hard coded safe harbor. I have a participant that was termed in 2012 and recieved pay 90 days after termination which went into 2013. What confuses me is the employer also withheld 401(k) from this excess monies. My question is: Is she entitled to Safe harbor for 2013? And or included in testing. Can i disregard her all together? Please advise.

Can the start of auto enrollment be pushed out or does it have to start within a certain period from meeting eligibility in the plan? Suppose a company currently has a Safe Harbor plan with one year eligibility and a QACA/auto enrollment feature in place. If the company wanted to offer immediate eligibility but did not want the auto enrollment feature to kick in until the second year of employment/eligibility, would that be allowable? This might create more of burden with explaining it in the annual notice, but otherwise I'm not able to find a specific citation that would prevent such a delay in starting the auto enrollment. In describing the minimum initial percentage, the regulations (I'm looking at 1.401(k)-3(j)) do not seem to tie the initial period to eligibility or any specific date. Does anyone see a problem with delaying auto enrollment like this? Thanks!

Hello; My employer has a Safe Harbor 401k plan with a 3% non-elective contribution made to all employees each year. After having been under this plan for a many years, I've recently noticed that the contribution is based on the value in box 1 of the W2 form. This value is amount I earned for the year less the contributions I made to the plan. Is this an error on the employer's part? Put another way, suppose I made $10k in a year and put $3k into the 401k. This leaves $7k. Should the employer make the non-elective contribution as 3% of $10,000 or 3% of $7,000? If the employer is making a mistake in how they are determining the non-elective contribution, how can I prove it? Are there IRS regulations that I can point to? And how do I go about getting any money owed (plus earnings on that money)? Also this plan has been in existence for over 10 years, has the rules about this 3% non-elective contribution? If so when? Thank you for any assistance... Sincerely; Michelle

I have a client that has a safe harbor match with profit sharing. For 2013, the profit sharing allocation is pro-rata. Is it possible to amend the 2013 plan to make each participant that own group? Will this cause the plan to lose it's safe harbor status and possibly effect the ADP test? Are all amendments after year end considered corrective amendments? I know I could set up a seperate profit sharing plan and just merge the two plans next year, but this is a last resort option.

Basic Information: ER sponsors a DC plan, utilizes SH Match. ER Would like to have a greater deduction for 2013. It is a calendar year plan. Only a handful of participants mostly the owner and his family. DC plan allows for a discretionary contribution, allocated on a pro-rata (across compensation) basis. My understanding is that the plan would not be allowed to change the profit sharing allocation method to something more favorable, such as cross-tested. The ER is interested in adding a DB plan, but one that is offset by the DC plan. Typically I would add a DB plan, and amend the DC plan to add language making it crystal clear what the offset arrangement it. And do it all prospectively. In this case, they want the deduction for 2013 and the prohibition against the changes to the Safe Harbor plan during the year would prevent the PS allocation method change. Would the addition of the DB plan in 2013 be considered a change, such that it would violate the prohibition against mid-year changes on the SH DC plan? I don't know if the DB and DC would be considered 1 plan, or could be considered 2 for this purpose. The DB plan would reference the DC plan and offset, but the DC plan would not, until a new amendment is effective in 2014. If that doesn't work, could the ER set up a new DC profit sharing only plan to pair with the new DB plan? The SH Match would be provided in DC plan 1, a PS contribution would go into DC plan 2 as the offset, and then there would be the DB plan. Or is all of this pointless because under ERISA they would all be considered one plan anyways and would be an impermissable change to the original SH plan? Thoughts? Advice?

Quick question, I have a plan with 3 people, two owners, one non-owner employee. All are HCE. The non-owner EE (we'll call them EE1) receives a large bonus, the owners do not. The plan wants to exclude bonus. Since all are HCE, it would pass 414(s). The plan does a 3% safe harbor to satisfy top heavy. They used to have NHCE, but don't any more, but kept the 3% SH. As far as I know, since the compensation would pass 414(s), the 3% SH contribution on just the non-bonus compensation would be fine. Anyone disagree? My concern is the top heavy. Does anyone know, or know where I can find, some guidance on this? Would the change of the plan definition of compensation, no longer allow the SH 3% to do double duty and satisfy the Top Heavy minimum? What I read in 416©(2) requires 415 comp. But 416(H)(i) provides the Safe harbor contribution exception. which defines comp 401(k)(9) as 414(s). Slightly different option(I think is simpler): The owners really seem to like receiving their own 3%. But lets assume they didn't mind not receiving it. Is there any problem with using the ability to exclude the HCE from receiving the 3%SH? Exclude HCE from SH SH would satisfy ADP, owners could defer max. Plan would still satisfy TH with SH contribution, though none would actually be given unless a NCHE was hired. Thoughts? Something I'm missing?

I have a plan sponsor client that wishes to make their Safe Harbor Non-Elective Contribution using the following formula: 4.5% of regular comp, plus 2.25% of bonus compensation. The plan document vendor has them on a volume submitter plan - not sure if relevant - and they are reluctant to provide their "blessing" of the formula, which would be in the addendum as a write-in fixed formula, rather than a modification to the plan's definition of comp for the SH NEC. A rough calculation of the 414(s) Compensation Test results in the HCEs with a lower average compensation percentage than Non-HCEs, however I am not so sure it passes the prerequisite "Reasonableness Test." If it was okay, does this formula need to be cross-tested? Unfortunately, I can't quite get anyone to give me a straightforward answer on this. I am leaning towards suggesting to the client that they simply exclude or include 100% of bonus and be done with it, rather than trying to thread the needle. Thanks!

A colleague of mine and I are disagreeing over a plan's ability to provide a disproportionate match as a Safe Harbor contribution. A disproportionate match, defined at 1.401(m)-2(a)(5)(ii), occurs, generally, where an NHCE receives a match that is greater than both (a) 100% of deferrals and (b) 5% of compensation. So, for example, a match of 200% up to 3% of comp would be fine until you defer past 2.5% of comp (at which point the contribution exceeds 5%). Generally, the consequence is that the disproportionate portion is ignored for testing purposes. Because only NHCE amounts can be disproportionate, it's meant to prevent trying to game the ADP/ACP test with weird matches. Here's the issue: In defining a safe harbor match, 1.401(m)-3(j) says the contribution will only be taken into account if it meets 1.401(k)-3(h)(1), which, in turn, says the contribution needs to meet the requirements of 1.401(m)-2(a), which of course includes our friend the disproportionate match rules. The implication, then, is that you couldn't have a safe harbor matching formula that could produce a disproportionate match. However, there doesn't seem to be any other support such a position. There's been no guidance that I can find on the interplay one way or the other. In all the articles/resources on permissible safe harbor matching formulas, nobody's mentioned the disproportionate match rules as an issue. Further, in laying out proposed safe harbor matching contributions, a number of the big-name providers have included formulas which would run afoul of the disproportionate match rules. Of course, none address the issue explicitly. Has anybody ever heard of this analysis? Have you dealt with safe harbor formulas that may trigger disproportionate matching contributions?

I have a client insisting he should be able to do a Roth Safe Harbor and make Safe Harbor POST-TAX contributions. I have explained that his plan is set up as a Roth 401(k) Plan and it has a Safe Harbor feature. He is taking advantage of the Roth Deferrals. I have explained that the government does not allow the employer to do Post Tax contributions. He now wants to see something in writing stating that employers cannot do post tax contributions. Any assistance or direction to the verbiage is greatly appreciated. Thanks