Guest jkrad Posted March 5, 2003 Posted March 5, 2003 I presently have a client who has a 401(K) and is going to use the safe harbor match to satisfy the ACP. My question is if he is the only one contributing to the plan even though other employees are eligible would the safe harbor match satisfy the top heavy. Would the employer need to make any type of contribution to the non participating employees if the safe harbor match does not satisfy the top heavy test
E as in ERISA Posted March 5, 2003 Posted March 5, 2003 See 416(g)(4)(G) excepting from "top heavy" certain plans that meet the 401(k)(12) and 401(m)(11) safe harbor rules.
Tom Poje Posted March 5, 2003 Posted March 5, 2003 actually, the safe harbor match satisfies the ADP test. However, if the match is the Basic Match or an enhanced match limited to 6%, then ACP is also satisfied. Symantics! If there are no other contributions besides the deferrals and safe harbor, then the plan is simply 'not top heavy' rather than top heavy being satisfied. gain, symantics, but what the heck. Such a deal, 100% of the assets belong to owner and no top heavy. That is why a notice has to be given at least 30 days before the plan year begin. Otherwise all owners would put these plans in and not tell anyone.
Guest jkrad Posted March 5, 2003 Posted March 5, 2003 What if the non participating employees have balances from previous years and no longer participate, would the owner be required to make a contribution to those employees to satisfy top heavy.
Blinky the 3-eyed Fish Posted March 5, 2003 Posted March 5, 2003 Top heavy contributions are made to active employees. In fact, the criteria for receiving the contribution in a DC plan (generally) is to be a participant in the plan and employed on the last day of the plan year. Your participants with balances you mention do not satisfy this criteria. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
E as in ERISA Posted March 5, 2003 Posted March 5, 2003 I thought that the post indicated that they are employees, just not deferring into the 401(k) at the present time.
Guest jkrad Posted March 5, 2003 Posted March 5, 2003 Katherine, The employees are eligible to defer but are not. The only person deferring and receiving match will be the owner. My question is if the plan goes top heavy would the non participating employees be eligible for a contribution from the employer or does the safe harbor match take care of that
E as in ERISA Posted March 5, 2003 Posted March 5, 2003 The exception in Sectin 414(g)(4)(H) applies only if the plan consists "solely" of safe harbor 401(k) and/or 401(m) contributions. Is that the case? There haven't been any 416 regulations since the safe harbor provisions were added. So its not 100% clear. But it appears that if you converted a regular 401(k) to a safe harbor 401(k), then you would still be subject to top heavy?
Tom Poje Posted March 5, 2003 Posted March 5, 2003 at the ASPA conference 2002 the question was asked what if plan consists of 401k, 401m and profit sharing features, but only deferrals and safe harbor are made. Can the plan use the match safe harbor to satisfy top heavy? Answer, yes, but if there were no other contributions made the plan is not top heavy. so you only have to watch out for forfeitures. Hint:if you are smart, read that as saying: amend plan so profit sharing forfeitures pay plan expenses.
Blinky the 3-eyed Fish Posted March 6, 2003 Posted March 6, 2003 I misunderstood by what was meant by nonparticpating employees. I presumed it meant a participant that terminated, but still had a balance. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
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