Dual Safe Harbor Plans?

[Übernerd]

Employer owns two subsidiaries and would like to set up a safe-harbor 401(k) plan to cover them. Because the subs have very different workforces, Employer is considering setting up the employer contribution differently for each. Specifically, it would like to use the "mandatory 3%" safe harbor for one of the subs and the "100% of the first 3% plus 50% of the next 2%" safe harbor for the other.

Employer's question is, can it use both safe harbors in the same plan? If not, can it have two valid safe harbor plans within its controlled group, but use different safe harbors for different subs?

Thanks for any insight.

LJ

[Tom Poje]

I will take a guess at this one:

In the same plan - I think not (unless I guess no HCE receive a match) - otherwise the plan would fail one of the requirements for a safe harbor match that no HCE receives at a higher rate than an NHCE.

In 2 plans - I believe this is possible as long as the plans do not have to be aggregated for coverage. if aggregated for coverage, then plans fail for same reason listed above.

[Übernerd]

I will take a guess at this one:

In the same plan - I think not (unless I guess no HCE receive a match) - otherwise the plan would fail one of the requirements for a safe harbor match that no HCE receives at a higher rate than an NHCE.

In 2 plans - I believe this is possible as long as the plans do not have to be aggregated for coverage. if aggregated for coverage, then plans fail for same reason listed above.

Thanks. I've been doing some research, and I agree that the question boils down to whether Employer is required to aggregate the plans. I haven't been able to answer that one, though. Any thoughts?

[Tom Poje]

if each plan can stand on its own as far as coverage goes, then it is my understanding you could have 2 plans with 2 different safe harbor formulas.