Safe Harbor Match

[DP]

I have a takeover Profit Sharing Plan (cross tested) with a 5% Match. There are three doctors who max out their contributions every year. I noticed that the past several years, the plan failed the ADP test, and it's running very close this year.

I want to restate their plan to a Safe Harbor 401k for 2004. The majority of the Safe Harbor plans we set up use the 3% non-elective contribution. However, this client likes the 5% match. I need suggestions on how to set up the match(es).

If I set up a Safe Harbor match plus an additional discretionary match, how will this affect the gateway for the cross testing or for top heavy contributions?

Would the client be better off with a 3% non-elective Safe Harbor and then an additional 2% SH Match?

Thanks for any ideas.

[Brian Gallagher]

You could always do the enhanced match, which can't go above 100% of the first 6%. So that should fit very well in your plan. There is no need to make any part of it discretionary. Will the doctors be receptive to the 100% vesting provision?

[DP]

Well, that's something we'll have to find out. There are only 3 staff members deferring (out of 15) who are not already 100% vested.

The current plan puts a last day restriction on receiving the match. That's another item we'll have to discuss with them if they go with a SH match.

Thanks for your suggestion!

[Tom Poje]

when you say 2% SH match, do you mean 2% discretionary match. I thnik the only restriction in the new regs is that you can't have an hours or last day requirement

[DP]

Tom, I guess I meant discretionary match. But I think Brian's suggestion will work best if it will fly with the docs.