Safe Harbor QNEC not made for HCE

[TPA Bob]

Have a safe harbor 401(k) plan with the 3% QNEC. Physician group where each physician's PC has adopted the Plan. A physician for one of the PCs passed away during 2006 and the spouse is refusing to fund safe harbor contribution attributable to the physician's eligible compensation. What happens to the Plan if this contribution is not made bearing in mind the participant is highly compensated?

Thanks in advance.

[Blinky the 3-eyed Fish]

Failure to follow the terms of the document is a serious violation, whether an HCE is involved or not.

[austin3515]

Does she realize that the funds would be paid right back to her immediately?

[Mike Preston]

This is serious stuff. The Plan Administrator of the Plan needs to engage counsel to determine the best course of action. If nothing changes, my advice to the Plan Administrator would be to try to spin off that person's interest into a separate plan and let the PC deal with it. This may require court action. You need counsel for that.

[Guest mjb]

I dont understand why a contribution is required. Under state law only Dr can be owner of PC. If spouse is not a doc or if PC is dissolved upon death of owner there is no employer who can make a contribution to the plan. Plan needs to confer w/counsel for spouse on status of PC. What does plan say about termination of PC as participating employer?