Safe Harbor Match in cross tested retirement plan

[Guest MEGary]

We are trying to project a plan for a prospect and we have some questions regarding the safe harbor matching contribution in a cross tested plan. What we are trying to set up is the safe harbor match of 100% up to 3% of deferrals and the additional 50% on the next 2% of deferrals. I need some clarification on what the match will satisfy. I don't have to run and ADP/ACP test because of the match, but what about top heavy? Does the match apply towards top heavy? If so, do I need to deposit an additional contribution for those participants who elect not to defer? What about a cross tested plan using the gateways? Would any part of the match be used to satisfy the gateway allocation? If so, same as the top heavy question - do we have to deposit any additional contributions for the participant who did not defer, therefore not receiving the match? Can we use any of the match to satify any other tests that I have forgotten about? I understand that if you use the 3% non-elective contribution, it applies to top heavy and the gateway contributions - I am just unsure of the safe harbor matching contributions.

Any sites would be helpful!

Thanks for any help!

[Tom Poje]

wow, you said a mouthful!

I don't have to run and ADP/ACP test because of the match, but what about top heavy?

Since you said the plan will be cross tested, that implies there will be more than safe harbor contributions, therefore you will have to provide top-heavy as needed.

If so, do I need to deposit an additional contribution for those participants who elect not to defer? What about a cross tested plan using the gateways?

Yes, those that don't defer will need top heavy. The matching contributions to others can satisfy their top heavy, but since you have to put in a gateway for all employees, it probably wouldn't come to that. the gateway will satisfy top heavy.

Would any part of the match be used to satisfy the gateway allocation? No

If you use a 3% non-elective, it can be used in cross testing, but you can not impute disparity on that piece.

[Guest MEGary]

Thanks Tom - I can always count on you!

[jaemmons]

For all plan years beginning after 12/31/01, matching contributions MAY be used to satisfy top heavy minimums, as outlined in Sec. 613 of EGTRRA. However, these contributions do not apply towards the gateway requirements, since they are not used in determining the EBAR's for the eligible participants.

[KJohnson]

For 2002 Plan Year on doesn't a safe harbor matching plan automtiall pass top-heavy? Is there any "counting" of matching contributions to even be done?

[Tom Poje]

KJohnson:

Yes and No. The regs clearly state a plan's whose contributions consist SOLELY of safe harbor contributions is not deemed top heavy. In this case, there will be additional contributions, so the free ride is not there.

There is some argument what is meant by SOLELY. Does that mean forever, or is on a plan year by plan year basis. General thought from the ASPA conference was that it was on plan year basis.

[KJohnson]

Thanks for the clarification Tom.

[jaemmons]

Tom,

To what Reg section are you referring?? What do you mean by a "plan's whose contributions consist SOLELY of safe harbor contributions is not deemed top heavy."??

[Tom Poje]

its

613(d) of the EGTRRA stuff

...paragraph (4) of section 416(g) is amended by adding the following...

(H)...the term 'top-heavy plan' shall not include a plan which consists SOLELY of....

emphasis is mine. This has been missed in a lot of write ups.

[KJohnson]

You are right Tom

I was just reading a "write up" when I did my post. It always helps to look at the statute itself.