Safe Harbor 401(k) Plans - usual to provide contributions to HCEs as w

[John A]

The code is clear that a "safe-harbor 401(k) plan" is required to provide the safe harbor match or safe harbor nonelective contribution only to NHCEs. In your experience, do most plans also provide the safe harbor contribution to HCEs?

[Archimage]

In every one of my plans that I administer, the HCEs get the safe harbor contribution. They love the contribution without the testing.

[Guest pineapple]

Same here. The main benefit of the safe harbor is to maximize contributions on behalf of HCEs.

[Richard Anderson]

We have a few 401(k) Safe Harbor plans that are cross tested, that have several non-owner HCEs.

We use a class allocation (new comparability) and do not give the 3% safe harbor to HCEs. The HCE classes get a high contribution rate (well above 3%), but none of it is 100% vested, as would be the case if they got a 3% safe harbor contribution.

So if these non-owner HCEs quit after a few years, the owners are not stuck with fully vested contributions.

[Richard Anderson]

Also, we have several new comparability plans that the owner's sons or daughters are in the plan. These son/daughter HCEs by attribution are in a separate allocation class and they would trash the a4 testing if they got the 3% safe harbor contribution.

[Guest sampat]

All,

I am getting my existing profit sharing plan (without 401K) amended to include 401-K option this year. My company (ExpertPlan) says that I can not add Safe Harbor provision until next year by giving notice by Dec. 1, 2002. But when I read IRS Notice 2000-3, it modified Notice 98-52 and said that a plan can add Safe Harbor 3% or matching as late as Oct. 1st.

Am I reading the Notice 2000-3 correctly?

Sampat

[Guest pineapple]

Sampat,

You are correct. If you are adding a 401(k) feature to an existing plan, and if the 401(k) feature is in effect for at least 3 months during the plan year, you can add the safe harbor provision as long as you provide the appropriate notice to participants. Good luck dealing with your provider!