Client wants to exclude EE from Safe Harbor Match

[Guest Mike Spickard]

I have a client that wants to exclude a class of employees (about 4 non-HCE's out of a total of 60 non-HCE's) from receiving the safe harbor match. They want to allow them to make salary deferrals and receive profit sharing contributions, if any.

The document we use permits class exclusions in particular money sources, but I fear that by excluding these employees from receiving the match (and thus the safe harbor match), that the Plan would cease to be a true safe harbor plan.

Any thoughts would be appreciated.

[actuarysmith]

I believe that as long as you pass coverage, you can exclude them from a safe harbor contribution.

[Tom Poje]

I do not think that is possible. In the case of a plan that consists of union and nonunion ees, I believe one portion could be safe harbor and the other not, or in the case of testing statutory includables and otherwise excludables you could avoid a safe harbor to a group of ees, but other than that my understanding all who are eligible to defer must receive.

This was made real clear in the new 401k regs especially in regards to a safe harbor discretionary match.

[MWeddell]

If you exclude these NHCEs from both the elective deferral and the matching contribution portion of the plan, then it would be just a coverage testing issue. However, under the facts you presented, Tom has it right (as usual): the matching contribution would not satisfy the safe harbor requirements.