Basic Safe Harbor Question

[pbarrett]

We have a 401(k) plan. Deferrals only with a 3% safe harbor match. No match. No ps contribution. Both Highly and nonhighly get safe harbor once eligibility is met.

Question: I know I don't need to worry about the acp/adp testing. What about the average benefit testing?

[Archimage]

I am assuming you meant a 4% safe harbor match (based on the basic safe harbor match formula). You are correct that you do not have to worry about ADP/ACP testing.

What test are you trying to pass with the avg benefit test? I am assuming you mean 410(b) coverage testing. You would first use the ratio % test. Since the plan has no other contributions it should pass coverage at 100%.

[pbarrett]

No, actually they have the 3% nonelective safe harbor. (It was thought they would be making ps contributions but the income was not there).

The tests all look ok to me. The 410b ratio passes at 100% like you said. I don't need the adp due to safe harbor.

I guess I'm just a little nervous because we're responding to an DOL audit and I wanted to make "really" sure I wasn't missing anything.

This plan is so clean and small I can't believe they are looking at it. The ratio test is fine; the average benefit %'s fails (ebar) piece. But the questionnaire asks for both.

Got me.

Thanks.

[pbarrett]

Oh, I just noticed I originally said 3% safe harbor match, meant 3% sh nonelective.

[rcline46]

For the ABPT just answer N/A. That is correct when the ratio % test passes.