ESOP's and Gateway

[Guest gopher2378]

Two seperate plans ESOP and Profit Sharing with 401(k) features. Same eligibility for entry into both plans.

3% safe harbor contribution is made to the ESOP to fund repurchase liability each year. Typically no match or profit sharing is made to the P/S 401(k) Plan.

Employer is wondering for 2007 if they can have the following contributions:

3% Safe Harbor to the ESOP

2% Profit Sharing to the P/S Plan to all NHCEs

Maximum amount allowed under rate group testing for HCES

So I guess the bottom line question is, am I disallowed from using the 3% safe harbor in the gateway test just because it is made to the ESOP?

I know for certain 410(b) testing I have to mandatorily disaggregate the ESOP but I've gotten myself so lost in the regs this morning my brain hurts!

[Tom Poje]

I can try and toss this one before the IRS at a Q and A session just to see what they say, but that wouldn't be until the end of July at earliest.

[Guest gopher2378]

I'm glad I'm not the only one who can't find the answer to this question. So far 30 views to my thread and no one has replied. Anyone out there who can shed even a small amount of knowledge about the gateway test. Is the gateway similar to the average benefit test in that employer contributions from all plans count?

[AndyH]

Even if the ESOP could be used to satisfy the gateway, you could not use it in the actual cross test so I see this as impractical at best.