SH Non-elective AND PS written into Document- use part of PS to fund SH?

[TPAVP]

Plan document is written to require a Profit Sharing Contribution of 10% of compensation. Employer elects Safe Harbor Non-Elective of 3%. Must the Employer contribute the 3% PLUS the 10% or may part of the 10% be used to fund the SH Contribution??

[jquazza]

If the document makes the distinction between both sources and the PS contribution specifically says 10%, you probably have to make it in addition to the safe harbor nonelective. Read your document.

[Brian Gallagher]

I would say you'd have to make both because they are two distinct types of contributions.

SH is 100% vested and not eligible for hardships no matter what you do, ie, you can't amend your plan to the contrary.

PS can be vestable and eligible for hardship distributions and you can amend those two provisions to your heart's content.

The profit sharing can go towards the Top Heavy minimum if the plan is so afflicted.

[david rigby]

Require? Profit sharing?

[TPAVP]

I believe the concensus is that the Employer must make both contributions, which is what I thought as well, but could not find definite rules regarding this. The Employer was unbending on mandating the 10% contribution in their document because they have promised that to their staff. I don't think they realized in doing this, they would be locked in to BOTH contributions. Thank you for the input.

[TPAVP]

I hate to beat a dead horse, but I have people in my office arguing with me on whether the Employer has to fund the 3% AND the 10%. Can anyone give me substantial rules or guidelines so I can have something one way or the other.

Thanks!

[Blinky the 3-eyed Fish]

You have all the rules in this case. It's called the plan document and up to you on how it is interpreted. Just be sure an IRS agent would feel the same way though.

Why they have a baked in 10% required contribution to a PS plan though is beyond me. Flexibility is the friend of plan sponsors.