Safe Harbor 401(k) and Allocation

[buckaroo]

Safe Harbor Plan using the Basic Match to satisfy ADP

Currently no other contributions.

If not SH, Plan would be top heavy.

If not SH, Plan would be fail ADP.

I have a plan with the following employees

Owner 1 - 40% - Comp 220000

Owner 2 - 40% - Comp 220000

Owner 3 - 10% - Comp 200000

Owner 4 - 5% - Comp 180000

Owner 5 - 3% - Comp 160000

Owner 6 - 2% - Comp 140000

3 Other HCEs

20 NHCEs

The top owner want to change the SH to the 3% SHNEC. He wants to provide it to the following:

all NHCEs

the 3 Other HCEs

Owner 6

Owners 1 and 2.

If Owners 3-5 make their quotas, he also wants to reserve the right to provide them with a 3% NEC. (They are not required to receive any contribution b/c they are keys and the plan will exclude keys from getting T-H minimum.)

Can I draft a plan provides the 3% SHNEC as stated above? If so, do I do so by excluding Owners 3-5 out of that portion of the plan? If so, I figure I can say that any owners under 40% making more than 150,000 are excluded from participation. (This is also how a plan on writing the tiers to maximize Owners 1 and 2.)

Is there any additional info or idea anyone can suggest? Any help is greatly appreciated.

[austin3515]

The 3% SHNEC cannot be discretionary, no matter who it's for (sure, you can do a "maybe notice", but that applies to everyone the same).

What you could do is exclude individuals who own between 3 and 10% of the Company. Then, you could add a new comp formula, and put owners of between 3 and 10% into a group, and declare a profit sharing only for that group if they meet their quotas (you could put all owners in their own group, if they all have inidividual quotas). The 3% SHNEC is counted for top-heavy (which out for part-year pay people), and nondiscrimination/gateway testing, so you could give the "3 to 10" owners 9% of pay (i.e., the gateway limit) assuming you can pass all testing.