Points Allocation

[Santo Gold]

If a Profit Sharing plan uses a points method for allocation (points for compensation increments of $100 plus point for YOS) of employer contribution, is that considered a safe harbor for 401a4 purposes? If not, can it be designed in a way that it would be considered safe harbor?

[Ron Snyder]

No and I doubt it.

[Guest Steve C]

Take a look at the uniform points safe harbor found at 1.401(a)(4)-2(b)(3). Your design may qualify, but you still need to be able to show that the average allocation rate for HCEs is no better than the average for NHCEs.