Should the employer set up separate accounts for safe harbor contributions?

[katieinny]

Participants in a plan are permitted to invest only their vested account balances. The employer invests the non-vested dollars. Now the employer is adding a safe harbor contribution to the mix, which must be 100% vested.

Must the employer set up a separate account for the safe harbor dollars (so they can be tracked), or can they be commingled with the account that holds the vested dollars as long as the employer adds another line item to the employee statements showing the safe harbor deposit?

[Brian Gallagher]

That is an interesting arrangment. You may want to sepreate it to a third account because safe harbor contributions may subject to different withdrawal restrictions (eg hardship).

[katieinny]

I thought about that, but this plan doesn't permit hardship withdrawals or any in-service withdrawals before normal retirement age (65).

I suppose they might decide to amend the plan at some point to permit hardships, and then there would be a problem figuring out what money is available if the safe harbor contributions have been commingled. But other than that, there's no reason to be able to track the safe harbor money separately?

[Brian Gallagher]

I don't see any problem as long as you can track the earnings on each money source correctly. I just think it's a really inefficient way to keep trak of accounts.