More cross testing issues

[Guest RBlaine]

This may be a dead horse issue for you guys but I didn't see an answer.

Plan is safe harbor 401(k) using the 3% Employer discretionary contribution to satisfy the Safe Harbor and Top Heavy.

For additional employer contributions, the employee must be employed on the last day of the plan year and have 1000 or more hours.

I understand that those that get the SH contribution must also pass the minimum allocation gateway regardless of the end of year employment and hours of service.

Some people became participants on 7/1/2002. For those I calculated 5% of participation salary and it is less than the 3% SH. I left them with the 3% SH, just as I would if it was just a straight PS contribution with 5% of salary contribution.

The 5% gets the HCE's to $29,000 and $11,000 deferrals bring them up to $40k each.

Now, suppose the employer wants to make a larger contributon to the plan in order to keep the NHCE's happy. Do only those who have 1000 hours or more and employed on the last day of the plan year get this extra contribution since the 5% to those "Safe Harbor only" satisfies the gateway?

I say that is correct but wanted some verification.

Thanks

[AndyH]

yes, based on your third paragraph.

[Guest RBlaine]

Thanks!

[Tom Poje]

You still need to follow the terms of the document.

If the document says only those with 1000 hours / employed on last day get the extra contribution, then those are the only ones who get the contribution. Chances are (e.g. if you are using a Corbel document, and I am sure there are others), there is nothing in the document that allows you to increase those ees who only received a safe harbor to the gateway minimum. to do that you would need a corrective amendment.

[Guest RBlaine]

Tom:

I specifically left out that part since I wanted to make sure I was doing the calculation part before I made any recommendations regarding changing the document.

There is a part in the document that states:

"The Plan Administrator may, as a matter of administrative procedure, make any election or use any conventions allowed under the Regulations which pertain, directly or indirectly, to cross-testing."

The employer contribution mentions eligible participants who are Non-Highly compensated Employees as receiving the allocation.

It is a Volume Submitter plan (I believe PPD) prepared by a local law firm. The lawyer who prepared the document believes that the quoted part allows giving the minimum gateway allocation to those who might not otherwise qualify.

[Tom Poje]

Man, that sounds like the ultimate in fail safe language!