Safe-harbor plan's pass on top-heavy testing

[Guest Pat Metallic]

Does a safe-harbor plan utilizing the prescribed match lose the pass on top-heavy testing where the employer also puts in a profit sharing contribution?

[Blinky the 3-eyed Fish]

Yes, to get the pass only the deferrals and safe-harbor contribution, whether it be non-elective or match, can be contributed. I know it was unclear whether that meant for the current year or ever, and I as far as I know that has not been resolved. Although, the leaning was that it applied to the current year.

[Fred Payne]

To expand on Blinky's answer, a Safe Harbor 401k plan in 2002 is also exempt from the top-heavy rules if the contribution includes the discretionary match (limited to 4% of comp) and a fixed match that cannot exceed a match on 6% of deferral. Thus, an HCE earning $200K could defer $11K, receive $8k in basic match, another $8k in discretionary match and $13K as a fixed match (118% of 5.5% of deferral) for a total of $40K. Even if no HCEs defer, no top heavy contribution is required!