Safe Harbor 401(k) Question

[Guest tgraham]

Safe Harbor 401(k) employer match meets the requirements to avoid the ADP and ACP tests. Does the Plan still need to pass the Average Benefit Percentage test? Wondering if we can bonus the spouses (who do work in the business) to allow maximum deferral and share in the additional 11% profit sharing contribution. If we do bonus the spouses, the Plan wouldn't pass the ABP test... This is probably a very common issue. Thanks.

[Guest Pensions in Paradise]

As you indicated, the safe harbor match only satisfies the ADP/ACP test under 401(k) and 401(m). If the company makes an additional profit sharing contribution you still have to satisfy 401(a)(4).

Note however that if the profit sharing contribution is allocated under a pro-rata formula then you do not have to perform the ABT. Of course, if the plan is cross-tested you have to perform the ABT.

[Guest tgraham]

Thanks for your reply. The profit sharing contribution is a flat 11% contribution for all eligible participants, NHCE and HCE all get the same. Based on your response, looks like no testing is required, so long as the 415 limits haven't been exceeded?

[Leopurrd]

Thanks for your reply. The profit sharing contribution is a flat 11% contribution for all eligible participants, NHCE and HCE all get the same. Based on your response, looks like no testing is required, so long as the 415 limits haven't been exceeded?

You are almost correct - there is no additional testing except the 410(b) coverage requirements (ratio for your profit sharing contrib)