Cross-tested and safe harbor Plan

[Guest cxs]

An employer wants to add a new comparability allocation and a safe harbor match to his 401(k) Plan. The match is 100% up to 4%. For the cross-tested formula he wants to contribute 2% to the rank and file and 6% to executives. If testing fails HCEs will be reduced. From a previous post I got the impression that the 1/3-2/3 could not be used for the gateway on a safe harbor plan but I cannot find anything to support this. Is this true? Does anyone see other problems with this formula? Of course, I could leave the definate formula out, but I want the employer to know what to expect.

Thanks!

[Tom Poje]

your question is slightly confusing, so let's see if I have the facts

existing 401(k). Since safe harbor must be 12 months , the safe harbor won't be for this year, but for next year. depending on plan year begins, notice must be given 30 days before that date.

new comparability plan would be two classes:

1. executives

2. rank and file

No set %, but the goal is to provide 2% to the rank and file and then contribute up to 6% to the executive, depending on passing all the tests. As long as the executives receive less than 3 times the rank and file, the plan meets the gateway requirements.

If plan is top-heavy, then all employees would have to receive at least 3%, though matches can count towrd this.