Safe Harbor Matches and Top Heavy...

[Guest RONNIE WASEL]

Client is adopting safe harbor 401k using the basic match. As per EGTRRA, the match now satisfies the top heavy contribution.

Question - if this plan is top heavy and is using the basic match and one of the eligible participants decides not to defer and thus does not get a match, does the employer then have to make a 3% non elective to this participant if the plan is top-heavy, or does this plan pass the top heavy simply due to the fact that it is using the basic match?

Thanks.

Ronnie

[R. Butler]

See EGTRRA §613(d). If your Plan consists solely of the a deferral and the safe harbor contribution then the Plan is not top-heavy. If someone doesn't defer he doesn't get a contribution.

If your plan has contributions besides deferrals and the safe harbor match, the plan doesn't get the benefit of §613(d); normal rules will apply.

[Tom Poje]

A precautionary note, based on prior posts,

if the plan does not provide the safe harbor to 'otherwise excludable' employees, then it also does not get the top-heavy free ride.