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I have a safe harbor design question - 401(k) regulations provide that "the safe harbor nonelective contribution requirement of this paragraph is satisfied if, under the terms of the plan, the employer is required to make a qualified nonelective contribution on behalf of each eligible NHCE equal to at least 3% of the employee's safe harbor compensation." I know a plan can limit the safe harbor contribution to only NHCEs or it can provide it to everyone. Is there anything stopping a plan from providing the safe harbor contribution to NHCEs and also to HCE's in a certain identifiable job category (but exclude all other HCE from the contribution)? Thanks,

Is it possible to design a plan using a Safe Harbor basic match for anyone who is contributing and also simultaneously use a Safe Harbor non-elective for anyone who does not contribute?

So, I've taken a job where some of the DB plans have separate accrual rates for separate groups of employees. A lot of the times, the accrual rate for a specific group is 0%. We're not counting people in these groups towards our 401(a)(26) count, since there's no meaningful benefit accruing for them. Now - let's take an example where the plan is combined with a 401(k) plan, and they're top heavy. The employee in question is Highly Compensated but not Key, and he's in one of those 0% accrual groups. Who out here thinks he counts as a participant in the DB plan, for purposes of needing to get a 5% top heavy minimum in the DC plan (the plan where the top heavy is taken care of for all)? Versus who'd think he's not really a participant in the DB and can get by with just 3% in the DC.... I wish the document had excluded these employees in the eligibility section, where it would be much clearer that they're definitely not "in" the DB plan. But that's not what I've got. Thanks... --bri (insert witty signature here....)

Question about permissible plan design under the ACA. As I understand it, annual dollar limits for essential health benefits are prohibited under the ACA. However, it has been suggested to me that it would be permissible to lower the coverage level after a certain limit is met. For instance, prescription drugs would be covered 100% after a $5 copay for the first $20,000 in annual expenses, but only at 30% after $20,000. Any thoughts on this? I'd imagine that a plan couldn't cover at only 1% after $20,000 because that would be a de facto annual limit.

We work with a 401k plan with two owner/employees who hit the 402g limit and with profit sharing, hit the 415 limit. They've adding 9 staff members in 2014 with a payroll of $1.1 mil exclusive of the owner’s compensation. Of the 9 staffers, two will make in excess of the compensation limit and the other 7 will hover around or above $100k. None of the 9 will be owners or officers and there are no family member-employees. We're expecting 100% participation from the staffers. In considering plan design, we initially considered incorporating the staffers and adding safe harbor since as near as I can tell the plan instantly will be top heavy. However, the owners are balking at the cost of either the basic match or the non-elective given the size of their payroll. Similarly, we considered new comparability design but anticipate that will be cost-prohibitive as well. We're considering starting a separate plan for the staffers, which would exclude the owners and vice versa. From what I've read, as long as no key employees participate in the staffers' plan, they do not need to be aggregated for top heavy testing. We're aware, however, that if any of the circumstances change and a staffer becomes a key employee, they must be tested together for top heavy. What I don't understand and cannot seem to find is what other impacts (other than administrative burden/expense) to nondiscrimination testing sponsoring two plans will have. Would the plans have to be aggregated for benefits, rights, and features if they use two different profit sharing formulas? Since neither plan will exclude employees or have allocation conditions on employer contributions, we don't anticipate coverage to be an issue if they have to aggregate the plans. Likewise, with ADP/ACP. There has to be something I'm missing. Thoughts? Will setting up a separate staffers' plan work?