Can owners opt out of the 3% safe harbor contribution

[Guest rffahey]

I have a cross tested partnership 3% safe harbor 401k plan. There are separate rate groups for each physician PC. The PC's are partners in the partnership.

For 2003 2 of the physicians terminated employment with the group. The TPA is saying that they still must make the safe harbor contribution for themselves just like any other employee. These 2 physicians do not want to make any contributions to the plan including this 3% safe harbor. What can we do ?

[pmacduff]

I don't know what document company you use, but our Corbel document allows us to excludes HCEs from the safe harbor by election in the document. Our Doctor client plans are mostly cross tested profit shares anyway, so while they don't receive the 3% QNEC, they end up maximizing. No matter what type your document, you should be able to accomplish this with a plan amendment.

[Tom Poje]

Only NHCEs have to receive the safe harbor, so it is certainly possible to exclude the HCEs from this contribution. But if, in your plan, you have more than 2 HCEs, then either all get or all don't get, again according to the terms of the document.

and, just for clarification, a safe harbor is not really a QNEC - see notice 98-52, VIII D - they even include an example.

I've referred to them as SHNECs for lack of a better term.

[Blinky the 3-eyed Fish]

If the language of the document has that HCE's will get the safe harbor nonelective, then you are stuck for 2003 and to current date 2004 or you otherwise have 411(d)(6) issues.