MBCarey Posted October 14, 2003 Posted October 14, 2003 I am sure this has been discussed, but please clarify for me. Can the 3% non-elective safe harbor contribution be used to satisfy the gateway. i.e., if I am giving 3% to NHCE's so the HC's can maximize their deferral and 2% profit sharing to the NHCE's for a total of 5% so the HC's can max out on the ps too. Is this okay. Also, what is your opinion about allowing an HC's to defer the max. in this situation, but not giving him a PS contribution. I have two owners and one very young son. Any profit sharing contribution I give to the son makes me fail the General Test. Corbel says it is okay to exclude him from the PS piece? Your thoughts?
Archimage Posted October 14, 2003 Posted October 14, 2003 Yes, the 3% can be used as part of the gateway. However, you cannot impute disparity on the SHNEC. I agree with your logic regarding excluding the HCE. However, the plan doc will have to be written to include that HCE in a different group. It sounds like your current document includes all of the owners in one group.
Blinky the 3-eyed Fish Posted October 14, 2003 Posted October 14, 2003 As just stated by Arch, you must follow your document. However, if the young HCE is in his own group, then testing using component plans might help get the youngin' something. Of course this is more advanced, so you might not know what I am talking about. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
MBCarey Posted October 14, 2003 Author Posted October 14, 2003 No Blinky, I am not sure what component plans means and am not sure I want to go there. The document does include all HC's in one group so that will need to be changed. Just out of curiosity, the plan has a young NHCE who will be eligible in 2004, I know she will need to get the 3% Safe Harbor, but will her coming into the plan change this scenario drastically? I am not sure how to speculate what effect that she will have and since I am doing these "what ifs" based on last years info. and will not be able to change the plan until 2004 anyway? Any insight? Thanks
Blinky the 3-eyed Fish Posted October 14, 2003 Posted October 14, 2003 Having a young NHCE enter the plan will only help the cross-testing and bolster the advantages of using the safe harbor nonelective contribution, since she is unlikely to defer a large amount and will probably lower the NHCE ADP percentage. What plan year are you working on now? Why do you say you can't change the plan until 2004? Does the PS contribution have a last day requirement? Does the plan provide the safe harbor nonelective contribution already (timely notice issued)? Why did you say Corbel said that the young HCE can be excluded from receiving a profit sharing contribution? More info please. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
pbarrett Posted November 10, 2003 Posted November 10, 2003 What about a match contribution in this scenario? Say this client also wanted to match 10 cents on the $1.00, whould that be ok if it passed the acp test (all is within the limits). My point is, the 3% safe harbor contribution only covers the adp and does nothing for the match piece, right?
Tom Poje Posted November 11, 2003 Posted November 11, 2003 you are correct in your reasoning. the match will require ACP testing, and it will also change the average benefits % test, it will not count toward the gateway minimum, nor used in rate group testing.
Archimage Posted November 11, 2003 Posted November 11, 2003 You could still meet the ACP safe harbor if your match formula does not match on compensation above 6%.
Tom Poje Posted November 11, 2003 Posted November 11, 2003 close. its a cap at 4% of comp and 6% deferred. so a formula of 66.67% of the first 6% deferred, would work for a safe harbor match. proposed regs, if I understand them correctly would require the discretionary to go to all employees (no hours/last day requirement permitted)
Archimage Posted November 11, 2003 Posted November 11, 2003 I assumed that his formula was not discretionary so the 4% cap would not come into play.
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