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It’s been decades since I last advised anything about a plan that uses a safe harbor for coverage and nondiscrimination. Am I right in remembering that a subaccount attributable to safe-harbor matching or nonelective contributions must be withdrawal-restricted as if it were a subaccount attributable to § 401(k) elective deferrals?

Have a bit of a weird scenario here and unsure how to proceed. We are getting ready to onboard Company X, who will be offering its employees a 401k for the first time. However, Company X acquired Company Y recently in a total stock purchase. Company Y has an existing Safe Harbor plan. Our belief is that Company X is now the sponsor of that plan. Is that correct? It isn't a merger of plans because there was no plan at Company X to merge with. If Company X is in fact now the sponsor of that Company Y plan, how can we get rid of the Safe Harbor provisions (Company X did not want a Safe Harbor plan)? Are Company X's employees eligible for the plan right now if they meet the general eligibility requirements? We believe yes. Can the SECURE Act provisions around Safe Harbor be utilized here for making a midyear change? Thanks in advance for any insight or suggestions!

Plan is designed as safe harbor 3% non-elective to NHCEs only. Appears that employer would like to add the HCEs now with a Mid-Year change. I'm pretty confident this is doable. But, because of the timing of the change, I think this requires a 4% safe harbor non-elective to both the NHCE and HCE? Am I correct? Thanks

Can you go from a 3% non-elective Safe Harbor contribution to a flexible (maybe) 3% safe harbor contribution mid year? Would you need to provide a seperate notice for this under SECURE, or can you just make the change when writing the Cycle 3 document?

I recently quit my job (10/2020) and have a 401k with a 3% non elective safe harbor. Usually, my employer would make the entire 3% contribution mid February the following year (a 1% match contribution was made on a monthly basis). My question is: If I were to make a cash withdrawal of all my vested funds prior to receiving the 3% SHNEC, what happens? Does my former employer open a new/ reopen my old 401k account to deposit the funds? Do I receive a check? Do I get nothing? I don’t think I’m going to have to do this, but I am curious. Below is some additional information. Thanks for the help! -I am not a HCE -I am only expecting about $2000 from the safe harbor -I am only 30 years old -I worked 1,500+ hours this year before resigning

I am an employee of a small law firm. I am "of counsel". 4 years ago, my employer complained that he had to make a Safe Harbor payment into the Profit Sharing Plan for me in the amount of 3% of my compensation. Since it was not addressed in my employment agreement, he pressured me to reimburse the 3% payment. Each year since I have done so, with $500 deducted from my pre-tax compensation calculation ever two weeks. To my knowledge, no one else at the firm has been required to do so but nearly all others are salaried employees. I am starting to think this practice violates the Safe Harbor rule and is not legal. That is, it seems this does qualify as a Safe Harbor contribution if the employer is reimbursed for the entire payment. Am I right? If so, what is the proper way to address it?

We know that the 3% Safe Harbor Annual Notice has been eliminated with the SECURE Act. However we received information from VOYA (attached - page 3) that says it is still required to give participants a notice if they are a new hire. I haven't read this anywhere else in regards to the SECURE Act. I would assume that only the SPD would need to be distributed? 0310_001.pdf

We are looking into taking over the third party administration of a plan that currently has a QACA that utilizes the 3% non-elective contribution safe harbor method that vests after two years of vesting service. We are exploring changing the ADP safe harbor method to traditional 3% non-elective which is 100% vested immediately, but if the administrator is already successfully administering the QACA, I am thinking this may not be in their best interest? I think my question is, "is the ability to administer the QACA properly the only difference between a two year difference in vesting requirement, or are there other considerations?" A two year vesting schedule seems like a huge benefit for a small trade-off. The end goal of the program design is to add nonsafe harbor non-elective contributions to the plan and potentially also adopt a DB plan, I want to use the QACA safe harbor contributions towards top-heavy and 401(a) testing if i can, and if it makes sense to continue to maintain the QACA.

Can I allow union employees to make elective deferrals but exclude them from the safe harbor match or do I have to set up a separate plan for them?

For a plan that chooses to pay in the Safe Harbor 3% Non-Elective contribution on a payroll basis, are they required to "calculate" the contribution based on annual compensation and thus need to do a "true-up" each year? I seem to be finding evidence that for the Safe Harbor Matching contribution you can choose to calculate and deposit it based on a payroll basis (as long as it's chosen/defined in the plan document). I've read the Treas. Reg. 1.401(k)-3(c)(5)(ii). I would like to confirm that for the Safe Harbor 3% Non-Elective Contribution the IRS currently does not allow an employer to calculate it on a per payroll basis? Thanks for your help!

Took over a plan that the document excludes highly compensated employees from receiving the safe harbor match. The plan now wants to change and give the safe harbor match to everyone. Can I amend mid year or do I need to wait until January 1, 2020. Thanks.

If this is a breach of protocol I apologize in advance. I first tacked it on to the end of an old thread and then I decided that maybe nobody reads old threads and that maybe I should start it as a new topic. Thank you. Hi to all! I'd like to tack my new question on to this old thread because they related to each other and even though I have read this 5 times I am still not sure how to handle my situation. I have an employer who wants to motivate his employees to defer more and in his ideal world they would defer 15% of pay and he would match 10%. No, for real, I really do have someone this generous! For 2019 he has already distributed a SH Match notice promising the employees dollar for dollar up to 6% of pay - already really generous. He's trying to figure out how to structure a discretionary match on top of the SH for 2019 that would reward employees who put in more than 6% of pay, in such a way that if someone put in 15%, they would end up with a total of 10% in employer match. He understands that at least some if not all of the match would be subject to the ACP test and that if the test fails, refunds might have to be made, and he doesn't care. At first he, and we, were thinking that he could do a discretionary match of 44.44% on deferrals between 6.01% and 15% of pay. For the guy who defers $15,000 on a $100,000 salary, this would get him a $6,000 SH match plus a $4,000 extra match for a total of $10,000. Then we started reading passages about having to calculate the discretionary match on all of the deferrals, not just the percentage over 6% of pay. In that case, the extra match would be 26.66% of all deferrals up to 15% of pay deferred. This would get our $100,000 person the $6,000 in SH Match plus the extra $4,000 in discretionary match for a total of $10,000. However, of course, it would increase the cost of the lesser paid/lower deferring people. I don't think this employer minds doing this, if the rules require it. He just wants to know what to do within legal parameters to achieve his goal. So here we go: 1. Must we structure the discretionary match to include all deferrals from the first dollar? 2. What exactly goes into the ACP test? The discretionary match only, or the total match including the Safe Harbor? We mostly deal with employers who won't even pay a Safe Harbor match, let alone do more, so it just hasn't come up before. Thanks in advance for helpful advice!

Client has a safe harbor plan that currently states that employee is eligible for safe harbor match as of the entry date following completion of first hour of service. Under Section III.D.2. of Notice 2016-16, can you amend the plan PROSPECTIVELY mid-year to require NEW employees to complete a year of service before becoming eligible for the safe harbor match? I believe that the guidance allows it, but I am curious as to whether anyone has done this. If yes, does client need to provide a new safe notice to existing participants? Thanks!

401k plan considering safe harbor match formula of 100% of the first 4% - would only apply to NHCE. The plan allows for discretionary match. The plan sponsor wants to fund HCEs with similar 4% discretionary match but retain vesting on HCE as well as last day rule. 1. Permissible Safe Harbor as match for NHCE = 4% and overall match for all =4%? 2. Is the discretionary still subject to ADP (which it would fail, obviously)?

Plan is a 'definite' 3% safe harbor annually. HCE's are excluded from receiving the safe harbor contribution. Plan is 89% top heavy Compensation is recognized from date of participation Plan is allocating 3% safe harbor to NHCE's Plan is allocating 3% profit sharing to HCE's Question: I have one 'mid-year' entrant so the safe harbor is given on participation wages. Since the plan is also allocating 3% profit sharing to the HCE's, what am I required to give the mid-entrant? A. just the 3% safe harbor on participation wages, or B. 3% safe harbor on participation wages + 3% profit sharing on wages earned before plan entry (i.e. total of 3% contribution on full years wages Thanks!

I am brooding over the interaction between the exemption from top heavy for safe harbor plans and a mid-year suspension of safe harbor contributions. I am thinking about three issues. For all three issues below, assume the plan would be top heavy but for the safe harbor exemption. Issue 1. The first is an old issue, but in re-reading Revenue Ruling 2004-13, I am having doubts now about Situation 4 in that ruling. Under Situation 4, the sponsor has a safe harbor match, but employees who at hire are eligible to make elective contributions have a 1 year of service requirement for the safe harbor match. The IRS responds as follows: In Situation 4, under the plan, newly hired nonhighly compensated employees who make elective contributions will not be eligible to receive any matching contributions until they have completed 1 year of service. Since this will result in a greater rate of matching contributions for highly compensated employees than for nonhighly compensated employees, the matching contributions do not satisfy the requirements of § 401(k)(12) (or § 401(m)(11)). Further, since all eligible nonhighly compensated employees under the plan do not receive safe harbor nonelective contributions or safe harbor matching contributions, the matching contributions made under the plan do not satisfy the requirements of § 401(k)(12). However, certain plans that provide for early participation may satisfy the requirements of § 401(k)(12) with respect to the portion of the plan that covers employees who have completed the minimum age and service requirements of § 410(a)(1), while satisfying the ADP test of § 401(k)(3)(A)(ii) for the eligible employees who have not completed the minimum age and service requirements. Unless a plan (within the meaning of § 414(l)) meets the requirements of § 416(g)(4)(H), no portion of the plan will satisfy § 416(g)(4)(H). (See Notice 2000-3, 2000-1 C.B. 413, Q&A-10.) I added the bold. Is this saying everyone in the plan has to receive the top heavy contribution (minus any match), or just the otherwise excludible employees? I thought for both 414(l) and top heavy purposes, the otherwise excludible employees were treated as one plan with the other participants. But I also thought you only had to give the top heavy in this situation to otherwise excludible employees. This is what has created my doubt. Issue 2. What happens if the employer only makes safe harbor contributions during a year, but in the middle of that year suspends the SH contribution? Up until the date of the suspension, the only contributions that were made were safe harbor contributions. After the suspension, the plan is required to fall back on the ADP/ACP test. Is it reasonable to take the position that the plan only received SH contributions for the year, and thus under 2004-13 the plan is still exempt from top heavy? I think the answer is no. I think once the plan is amended mid-year to suspend the SH contribution, the contributions that were previously made are no longer considered SH contributions for purposes of the safe harbor exemption from top heavy status. I could see, however, that one could argue that during the year the plan only received safe harbor contributions, and nothing else, and thus under 2004-13 the safe harbor exemption still applies. I could also see an argument that the top heavy contribution is only required for compensation paid for the portion of the year the plan is no longer safe harbor. Nonetheless, I think the best answer is that once the plan is amended mid-year to suspend the safe harbor, the plan is top heavy for the entire year. Issue 3. We know that a plan that does not give the SH contribution to HCEs nonetheless qualifies as a SH plan (provided all other requirements are met). In an ASPPA Q&A, the IRS said the HCEs who do not receive the safe harbor and who are not key employees are not eligible for the top heavy contribution. What if the plan is amended mid-year to suspend the safe harbor contributions only for HCEs? Would the analysis here be different from the analysis in Issue 2? I think the answer here is yes, meaning the plan remains a safe harbor plan for purposes of the top heavy exemption even if the plan is amended mid-year to suspend the safe harbor contributions only for HCEs. If the plan can give the HCEs nothing for the entire year and still be safe harbor, it should be able to give the HCEs a safe harbor contribution for part of the year and still be safe harbor.

There is a safe harbor plan that is top heavy. The plan also has a New Comp and wants to exclude 3 Non-Key employees from receiving a Profit Sharing. These Non-Key Employees are also HCE that are excluded from receiving the Safe Harbor Non-Elective. Can those individuals be excluded from receiving the 3% Top Heavy/Minimum Gateway OR do they have to receive a funding.

I'm working with a plan that is considering implementing a QACA SH match on 1/1/2019, but they would also like to match additional contributions over the QACA match. Specifically, they want to match 50% of contributions on deferrals between 7-10% - auto escalating up to 10% using the QACA AE provision. They want to try and get total employee contributions over 15%, but encourage it with the discretionary match over the QACA formula. is the discretionary match subject only to ACP? are there other considerations with offering this additional match above the SH match limit? any help would be appreciated.

Company A and Company B form a controlled group. Company A sponsors a safe harbor match 401(k) Plan, which Company B has adopted as a participating employer. There is one employee, who receives compensation from both entities, but all of the deferrals have been made through Company A. For purposes of calculating the safe harbor match, I believe I should aggregate the compensation from both companies. For deduction purposes, should the safe harbor match contribution for this person be divided prorata based on compensation, or should the entire deduction be taken by Company A, since the deferrals were made by the employee from his Company A compensation.

Is it permissible to use Safe Harbor money as a source for paying insurance premiums? Participant is under 59 1/2. If so, what are limitations? Thanks for any input or cites.

401(k) plan document reflects the "maybe" 3% non-elective safe harbor option. Plan sponsor received an election form from TPA, selected "I will amend the plan to trigger the safe harbor for 2016", distributed the required notice to participants on a timely basis and actually made the contribution within the requisite period. Sponsor now realizes they never executed the required plan amendment. Anybody have any experience/success with a VCP filing to fix the error via a retroactive amendment?

I have a question regarding a safe harbor 401(k) established in August 2016. We set the effective date as of 1/1/16 to allow all enrolled employees at 8/1/16 the ability to receive a full year contribution into the plan. Prior to us establishing the plan, we had two employees terminate their employment (one in February and one in April of 2016). Now our Administrator is saying that because our effective date is 1/1/16, we have to provide a safe harbor contribution to the two terminated employees even though they were not employed when we established the 401(k) plan. Does this sound right? It does not make sense to me. Any help would be appreciated.

Please confirm the compensation earned from all members of a controlled group of businesses is aggregated for purposes of allocation, coverage, ABT and General Testing. Facts: LLC (single member, taxed as S-Corp) sponsors a Safe Harbor 401k with Discret PS features. The LLC controls all plan provisions. There are several nonHCE covered by the Plan in addition to the "owner" C-Corp (owned by same person who is Member of LLC) adopted the LLC's Plan, follows the LLC's provisions as stipulated, is a "participating employer." Suppose for this question the LLC Member's elig compensation is $50,000 and his/her C-Corp is $100,000. Total earnings $150,000. Is compensation for purposes of SHM $150,000, irrespective of which source of income (LLC or Corp) it was deferred from, meaning if the 401k deferral is deferred from the LLC source, wouldnt you still determine the SHM on the aggregate of both compensation sources? In this instance, the SHM w b $6,000... Further if the Corp fails to contribute its proportionate share of the SHM, the LLC will (be forced to contribute it to satisfy the SH) and can deduct it? Is compensation for purposes of the PS allocation $150,000? Deducted by entity who contributes it, correct (Same as above)? Further if the Corp fails to contribute its proportionate share of the PS, the LLC will (be forced to do so) and can deduct it (subj to 25% limitation)? For purposes of the ABT and Rate Group testing, the aggregate compensation is used for the Accrual Rates, correct? For determination of HCE status, aggreg is used? Each entity tests based on its compensation for 25% deduction limitation? Thank you

FACTS: - The Plan is a 401kPSP with 3% Safe Harbor NEC - It's the 2015 Plan Year - Employer business and 5500 returns were on extension to 9/15/2016 and 10/15/2016 respectively - Business returns were filed in June, deducting the Employer SH contribution In August, the Employer decided to contribute PS for the 2015 plan year QUESTIONS: 1. Is there any reason the PS can not count as a 2015 Annual Addition? It was deposited timely (before due date of tax return) for 415 and therefore seems it should count as a 2015 Annual Addition even though the employer failed to take the deduction for it on the 2015 employer return 2. Since the 2015 Business Returns were actually filed PRIOR to (the deadline to file and) the employer's decision to make this 2015 PS contribution, no deduction was taken on the 2015 returns -- Other than the 25% deduction limitation for 2016, is there any reason the employer can not deduct the 2015 PS on his 2016 business return (along with any other 2016 employer contributions)? The employer does not want to amend its 2015 tax return if it can be avoided. 3. If for some reason the deduction of the 2105 PS can not be taken on the 2016 return, can the 2015 PS be recharacterized as 2016 PS? Thank you

As an employer, our employees are classified as Full-Time (35+ hrs per week,) Part-time (30-34hrs per week,) and per diem (less than 30/when we need them.) We charge our insurance premiums based on those classifications. The less hours you work, the more the employee share is. Due to ACA classifying everyone over 30 as full time, when calculating affordability would we need to calculate both the lowest share single coverage price for 30-34 and the lowest share single coverage price for 35+? Or is it just based on our lowest price no matter what hour category we put them in? It is the same MEC and MV plan.