Safe Harbor Matching Contributions

[Guest sammy]

An employer has a 401(k) plan with a safe harbor match. Currently, all employees are immediately eligible to make salary reduction contributions and receive the match.

For next year, the employer would like to impose different waiting periods for two groups of employees: A waiting period of 6 months for one group of employees and a waiting period of 1 year for another group of employees. After satisfying the applicable waiting period a new employee will become eligible to make salary reduction contributions and receive the safe harbor match.

Assuming each group of employees satisfies minimum coverage, can this be done and still stay within the safe harbor?

[Tom Poje]

see q & A 10 of notice 2000-3

...Accordingly, a plan that uses one of the 401(k) safe harbor methods is not required to provide safe harbor contributions to participants who have not yet attained age 21 and completed a year of service....

...these persons do not have to be treated as eligible employees...so long as the employer has elected to treat them separately for coverage purposes pursuant to section 410(B)(4)

this means, if you invoke 410(B)(4), you have 2 plans - a safe harbor plan for those age 21/1 year service and those that don't.

the conclusion of the answer does say that this group of employees (otherwise excludable) must be tested for ADP (and, if applicable, matching contributions) so it does look like it is possible to provide this group of employees with a match, and since it is doubtful there would be any hces in the group (especially under the new rules) it looks like you can actually accomplish what you want. why you would want to, who knows, but you can discriminate in favor of nhces all you want.