termination of safe harbor provisions

[Guest Jane Freeman]

A 401(k) plan was a safe harbor plan in 2004 using a safe harbor basic match formula to satisfy the ADP. In 2005 the plan switched to a non-safe harbor plan using prior year testing. Can the safe harbor match that was made in 2004 be used to calculate the prior year ACP or is the prior year ACP 0% (no additional match made in 2004)?

Thank you.

[rcline46]

Had the plan been using current year testing (required in a SH plan) for at least 5 years or since plan had been in effect? If no, then cannot switch to prior year testing, so check that out first.

If switch is ok, the any and all matches for the prior year, SH match included, are usable to determine rate for prior year testing.