Prorate Comp on a Nonelective SH Contribution

[Guest darrensoup]

Can anyone confirm for me that I could prorate comp for a participant entering a Safe Harbor Plan on 07/01/04, for both the Nonelective safe harbor contribution and the profit sharing contribution.

My understanding is that I can prorate even though the plan is top heavy; however I need to be certain that between the Safe Harbor contribution and the Profit Sharing Contribution the participant receives a total of 3% in Employer

contributions based on the participants annual Compensation.

Thanks

[Tom Poje]

It is not so much of prorate comp, but simply using comp from date of participation, very common in DC plans.

you are correct, even if the document says date of participation, the ee must receive 3% of total comp

[Guest darrensoup]

Tom,

So you do agree that I may use Comp from date of participation for both the Safe Harbor Nonelective and Profit Sharing Contributions, as long as the participant receives a total of 3% in Contributions based on the participants annual compensation.

[Guest Pensions in Paradise]

Yes, if that is what your document says. But the document has to specifically say that only compensation earned while a participant is counted for allocation purposes. If the document is silent, then you have to count total comp for the plan year.