Cross-tested PS Plan with safe-harbor 401(k)

[ac]

I am cross-testing a profit sharing contribution to a plan that has a 401(k) safe harbor match. There are employees (nonexcludible) that terminated during the plan year that did not meet the 1000 hour requirement for an allocation and they did not defer any compensation (ie no match). Do these employees have to receive a gateway contribution?

My understanding is that they did not benefit under the plan and no gateway is required. If the safe-harbor was a nonelective 3% and they were eligible to defer, then the gateway would be required.

[Mike Preston]

Sounds right to me.

[Earl]

is this current thinking?

I have a cross tested PS/401k with the SH match and additional PS.

Person terminates with no deferrals (so no match). Plan has last day and 1,000 hr rule. No 410(b) coverage issues.

I am thinking that a person who has the opportunity to defer and receive a match is considered to be benefitting (like for 410(b)) so they would have to get the gateway.

Is it only benefiting under the non-elective portion of the plan that causes need for minimum gateway?

I have participants:

1. Terminated Sept (Calendar plan) with no deferrals - No gateway?

2. Terminated Jan with deferrals - Must get gateway?

Help and THANKS

[Archimage]

The gateway only deals with the non-elective portion. If you receive any type of contribution then you must receive the gateway minimum.

Your examples:

1. You are correct because at no time did he receive any type of non-elective contribution.

2. You are incorrect. He did not receive any non-elective contribution triggering the gateway minimum.

[Tom Poje]

Earl, just to make things clear, because coverage and nondiscrim are getting 'merged' in your statement

I am thinking that a person who has the opportunity to defer and receive a match is considered to be benefitting (like for 410(b)) so they would have to get the gateway

it is true, if ee received no nonelective, then no gateway is due.

for coverage

401(k) eligible to defer, so considered benefiting

401(m) eligible for the match, so considered benefiting

nonelective - received zippo, if worked over 500 hours then includable ad not benefiting. also would show as 0 in the rate group test.

[Earl]

Thank you both.

Seems clear, then, that the gateway is required when benefiting under the non-elective portion of the plan, not just under any portion of the plan, even if employer funded (like match).

[FJR]

I would mention that if the plan is Top Heavy, everything mentioned is not applicable.