safe harbor - last day/1000 hour requirement

[smm]

Yes, I know that today is Christmas, but I still have end of year deadlines. My question concerns the requirements for a safe harbor nonelective contribution. There are several threads on this subject, but I am still confused.

Employer wants to have a safe harbor 401(k) with a 3% non-elective contribution. Employer wants a 1,000 hour requirement with a last day of year requirement for receiving the 3% non-elective safe harbor contribution. My undertanding from 2000-3 is that is allowable, (the result was different is 98-52) but what about the participants who made deferrals during the year and quit before the end of the year or have less than 1,000 hours. Do their deferrals have to be tested under ADP??

I could be reading 2000-3 incorrectly. Any help is appreciated.

Thanks.

[Tom Poje]

you can NOT place an hours or last day requirement on the safe-harbor contribution.

you are permitted, in the case of a plan that has immediate eligibility for deferrals to place a year of service/ age 21 requirement.

In other words, you can exclude those who never would have entered the plan if there was a 1 year / age 21 requireent.

but once someone has worked 1 year (e.g. completed 1000 hours) and attained age 21, you can not exclude them.

in some ways, this is no different than implementing the 'otherwise excludable' option available for adp testing, coverage testing, etc.

[John A]

Tom, are you saying you can choose whether or not to use the age 21/ 1year requirement each year for this purpose, and you do not have to have the age 21/1 year requirement stated in the plan document?

[Tom Poje]

your annual notification to the client should have a toggle box that could be used for that purpose.

again, once an ee has completed 1 yr svc/age 21, he will get the safe harbor even if he works less than 1000 hours in a given year.

see enclosed sample notification

[Richard Anderson]

I believe that the YOS, age 21 requirement must be stated in the document. You could amend year to year, but I don't think that it is something that can be elected outside the document.