Safe Harbor CODA w/after-tax

[Guest jae3207]

I think I know the answer, based upon Rev Ruling 2004-13, but need someone to help clarify.

Safe harbor CODA (satisfies with 3% NE), no match but allows for and currently has ee's making after-tax contributions. Based on my research, it appears that the contribution of after-tax $'s would subject the plan to top heavy rules as this is a non-safe harbor 401(k)/401(m) contribution.

Thoughts??

[namealreadyinuse]

Haven't looked it up, but doesn't the 3% NEC automatically satisfy TH.

Isn't your question whether the after-tax requires you to ACP?

[pmacduff]

NAIU - SHnec satisfies top heavy if there are no other contributions to the plan (deferral and safe harbor only) and you can base it on comp as a participant. If the plan has forfeitures or other employer allocations (profit share, etc.) then top heavy applies and has to be computed on total annual comp, not participation comp.

I think ja3207 wants to know if the "after tax" contributions are going to fall into the category of other allocations and top heavy will kick in...

now that I've said that, I'm not sure myself but the after tax aren't "employer" contributions, so I think it would be ok. others?

[Archimage]

After-tax contributions would have to be tested under ACP. They do not qualify for the safe harbor treatment.

[pmacduff]

but how do the after tax contribs. affect the top heavy status of the plan since it no longer consists "soley" of safe harbor and 401(k) pre-tax? can the plan still rely on the top heavy pass?

[Archimage]

I would say you would be subject to top heavy. In order to be deemed not to be top heavy your plan must consists of 1) solely of a safe harbor 401(k) arrangement and 2) all matching contributions satisfy the ACP safe harbor.

After-tax contributions would not meet the first part.

[Jim Chad]

When you say aftertax, you do mean the old after tax and not ROTH, don't you?

Is there a reason for someone still doing the old after tax?