HCE only 401(k)

[Earl]

401(k) Plan... 2001 passes ADP with NHCEs, but by 12/31/01 they are all terminated (small tech co.).

2002 only the HCEs (2). As I understand it, 401(k) with no HCEs is deemed to pass ADP. But is there an implicit current year election in this case. Or is there just no test, current or prior.

[Mike Preston]

Nothing implicit. If using prior year, it might fail.

[JanetM]

Why not just make it a safe harbor plan and forget the testing?

[Earl]

I am worried about 2003/2004 when NHCEs might be hired/become elgible again. Safe Habor is a good idea and might be the only way to go. In fact, they were safe harbor in 2000 before the cash ran out, so the idea would be sellable.

Would plan be forced to use current year when NHCEs are eligible/tested again, since prior yr NHCE% would be = 0?

(Forced meaning under pain of HCEs not being able to defer.)

[Guest PAUL DUGAN]

I would think you would want to change to current year for 2001 ( should be no problem if you are in the RAP, the problem is in changing from current to prior). This should also solve the problem for 2002 & 2003.