Safe Harbor 401(k) with Union Employees

[Blinky the 3-eyed Fish]

A takeover safe harbor 401(k) plan allows union employees to defer and receive matching contributions, but they are ineligible for any nonelective sources, including the safe harbor nonelective contribution.

I can't find anything that says this is permissible. Notice 98-52 and the ERISA Outline Book simply mention that all employees eligible to defer (except otherwise excludable employees) must receive the safe harbor nonelective.

Confirm or deny my findings please.

[Blinky the 3-eyed Fish]

I found my answer that all is well

Notice 98-52 IX.B

B. Aggregation and Disaggregation Rules

1. Plans

The rules that apply for purposes of aggregating and disaggregating CODAs and plans under sections 401(k) and 401(m) also apply for purposes of sections 401(k)(12) and 401(m)(11), respectively. See sections 1.401(k)-1(b)(3) and 1.401(m)-1(b)(3).

Accordingly, all CODAs included in a plan are treated as a single CODA that must satisfy the safe harbor contribution requirement of section V.B and the notice requirement of section V.C. Moreover, two plans (within the meaning of section 1.410(b)-7(b)) that are treated as a single plan pursuant to the permissive aggregation rules of section 1.410(b)-7(d) are treated as a single plan for purposes of the safe harbor methods. Conversely, a plan (within the meaning of section 414(l)) that includes a CODA covering both collectively bargained employees and noncollectively bargained employees is treated as two separate plans for purposes of section 401(k), and the ADP test safe harbor need not be satisfied with respect to both plans in order for one of the plans to take advantage of the ADP test safe harbor. Similarly, if, pursuant to section 410(b)(4)(B), an employer applies section 410(b) separately to the portion of a plan (within the meaning of section 414(l)) that benefits only employees who satisfy age and service conditions under the plan that are lower than the greatest minimum age and service conditions permitted under section 410(a), the plan is treated as two separate plans for purposes of section 401(k), and the ADP test safe harbor need not be satisfied with respect to both plans in order for one of the plans to take advantage of the ADP test safe harbor.

[Blinky the 3-eyed Fish]

Okay, for my third post in a row I have another issue. Does the TH contribution have to go to these union employees in the plan? My only find so far is this from 1.416-1 (see underlined passage), which would indicate that the TH minimum is not required. However, none of my VS documents are worded to exclude union employees from receiving the TH minimum if in that plan. Darn union employees in with non-union!

Q-3. Must a collectively-bargained plan be aggregated with other plans of the employer to determine whether some or all of the employer's plans are top-heavy?

A-3. A collectively-bargained plan that includes a key employee of an employer must be included in the required aggregation group for that employer. See Question and Answer T-6 for rules concerning required aggregation. A collectively-bargained plan that does not include a key employee may be included in a permissive aggregation group. See Question and Answer T-7 for rules concerning permissive aggregation. However, the special rules in section 416 (b), ©, or (d) applicable to top-heavy plans do not apply with respect to any employee included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective-bargaining agreement between employee representatives and one or more employers if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. In determining whether there is a collective-bargaining agreement between employee representatives and one or more employers, the additional condition of section 7701(a)(46) must be satisfied after March 31, 1984.

[Belgarath]

I agree that it isn't required by law, but the document issue is a tough one, especially without being able to read it. Sounds like you are floundering (sorry, couldn't resist) - I'd be inclined to take the approach that since the clear intent of the document (which, in the event of conflicting provisions, must of course be interpreted in its totality) is to exclude union employees from any contribution other than a required match, that this is sufficient. Of course, that's easy for me to say since I'm not the one who will hang for it.

[Mike Preston]

Surely you wouldn't hang for it. Maybe breaded and baked is more apt.

[Alf]

The document sounds fishy. I think you should give them the minumum just for the halibut.

[wsp]

This is something that I just can't fathom. We always say go to the plan docs and do what they say.....then quietly whisper under our breath unless it's something we clearly don't want to do, then it's "the intent of the document was...."

In this case, though I think you can make a case for exclusion as they were specifically excluded from the other contributions.

But, now I've clearly thunk too much and have a haddock.

So, I say "Abalone" and let the client decide.