Safe harbor 401(k) issue

[chris]

E/er currently maintains no qualified plan but wants to put a 401(k) with safe harbor provisions in place. The approach would be to have the PSP portion effective 1/1/04 and the deferrals effective 2/1/04. The safe harbor notice specifying the 3% non-elective contribution will be distributed prior to 2/1/04. My understanding is that even though the deferrals would not start until 2/1/04 the 3% NEC can still be based on comp.from 1/1/04 to 12/31/04. Can anybody confirm? Thanks.

[Archimage]

Agreed. Just make sure the plan doc reads this way.

[chris]

Additional issue.... any problem with having all employees employed on 1/1/04 be eligible for the 401(k) portion even though it is not effective until 2/1/04? Since the plan has to be submitted to the IRS anyway b/c of a weird vesting schedule (non-pre-approved in the volume submitter doc.) I guess the better approach would be to have all e/ee's employed on 2/1/04 be eligible and have 2/1/04 be an entry date for the initial plan year only......??? Thanks again...