Safe Harbor 3% Contribution Cannot be Made (Employer doesn't have the

[Guest CRA]

I have an employer who does not have the funds to make his 2001 Safe Harbor 3% elective contribution (due 12/31/2002). I have researched various resources and have not had any luck! Suggestions and comments would be most appreciated.

[Guest Mike Kimball]

IMO, the plan would then not be safe harbor 3%SHNEC, and so it is subject to ADP/ACP testing and also top heavy minimum requirements....which is probably why they elected the 3% SH in the first place.

[Tom Poje]

it depends on what your notice said. if you said you

'would' provide the 3% SHNEC I don't see how you can get out of it. Maybe it will be a late contribution, but I simply can't see how they can get out of it. If the plan is top heavy, are they skipping making the top-heavy as well? I think not. I would argue it works like a moneypurchase plan - your notice says you are going to get 3%, there are no hours/last day conditions, so the employee has earned or accrued his SHNEC

if your notice said 'you might' provide a SHNEC than you obviously wouldn't have to do so, but you would have to test, and on a current year basis. In fact, I thought that was one of the reasons the IRS allowed that option.

(I think there is some info out there on discontinuing a safe harbor match, I would think similar logic applies - in that case you have to give notice of discontinuance, but you have to provide the match accrued up through...I think it was 30 days after your notice of discontinuance.