safe harbor 401k plan design

[kmciver]

I have a client who wants to implement a safe harbor 401k NOW. They have a 9/30 existing ps plan. I don't think they can do safe harbor until 10/1/04 due to 3 month rule. This is my question: If I they do 401k for the next two months and I use prior year adp, can I use the assumed nhce adp of 3% for last year and then add a qnec of 3% to the nhce for this year for a total nhce percentage 6%? Thanks K

[Bird]

No; you'd be mixing the prior year's deemed NHCE ADP of 3% with a current year QNEC. The prior year's is "deemed" because, well, there is none and it's too late to make a QNEC.

[kmciver]

Makes sense. Thanks, Karen

[Brian Gallagher]

How is it too late to do a QNEC? I would think the company still ahs time to put in a QNEC for the "prior" plan year.

[Bird]

Sorry, "too late" was a poor choice of words. "Impossible" since the plan didn't permit deferrals in the year ending 9/30/03, and, presumably, didn't have any provisions for QNECs either.