Non Elective Safe Harbor and ESOPs

[CTipper]

I know in a KSOP you can't fund the Safe Harbor with employer stock, but if you've got a properly functioning leveraged ESOP, can you have the 3% contribution go into that Plan?

Thanks

Christopher

[Guest tmills]

I believe so, but you have the additional restrictions on a safe harbor contribution, especially 100% vesting that would have to be dealt with. If the safe harbor eligibility is different than ESOP eligiblity, that could also cause problems.

[CTipper]

So, as long as the document allows for the separate contribution this would be possible? Can we have the Non Elective Safe Harbor contribution be 100% vested and the normal one be subject to a vesting schedule?

[Guest tmills]

I don't see why not. It will just be more administratively complex tracking vesting and contribution eligibility by contribution source. If the ESOP is leveraged, you could have shares released going to different groups of people.

For example, the normal safe harbor contribution does not have any eligibility requirements to receive it. If you are eligible to defer (and defer in the case of a match) you get it. That $ then goes to the esop as a safe harbor contribution. The esop requires some combination of 1000 hours and last day to get a contribution. The result is potentially some employees eligible for one part but not the other.

Hopefully some others will add their thoughts too.