Safe harbor match started mid-year.

[Guest revier]

A client with a PYE 09/30/04 profit sharing only plan added a 401(k) feature with a basic (100% on the first 4%) safe harbor match provisions effective 2/1/04. They elected to match on a EOY basis.

What compensation should be taken into consideration when calculating the safe harbor match? Should full year compensation or compensation from 2/1/04 - 9/30/04 be used? Please note all participants were eligible before 2/1/04. They just allowed deferrals effective 2/1/04.

The use of full year compensation will give me a different result only if the participant elected a deferral rate greater than 4% during the portion of the plan year they were allowed to defer.

As it turns out, only the HCEs elected greater than 4% during the portion of the year they were allowed to defer.

They will be giving a profit sharing contribution as well. Is it possible to use full year compensation for the profit sharing contribution and compensation from 2/1/04 - 09/30/04 for the safe harbor match if all the participants met the eligiblity requirements for the plan the entire year?

Any thoughts would be greatly appreciated.