Can SH w/ NC be TH?

[masteff]

I'm new to new comp plans. Trying to figure out if one would work for my current employer.

If we do a safe-harbor 401(k) (not sure if SHMAC or SHNEC, leaning to SHNEC if we do NC), does that mean any NC component of the plan will pass top-heavy (by virtue of the safe harbor)? And is that answer the same for any type of profit share component, not just new comp?

Thanks in advance for any clarification that can be provided.

[Tom Poje]

variations of this question keep coming up, so:

a safe harbor plan is top-heavy free only if there are no other additional contributions (something besides the deferrals, and SHNEC and/or SHMAC)

now, can SHMACs and SHNECs be used to satisfy top heavy? yes.

if someone receives a SHNEC, then they have received a type of nonelective - therefore, they would get need to get bumped up to whatever gateway minimu you have.

if you go with SHMACs, then you will have to provide top-heavy to those that dont defer, so most people go with the SHNEC

[masteff]

now, can SHMACs and SHNECs be used to satisfy top heavy? yes.

if someone receives a SHNEC, then they have received a type of nonelective - therefore, they would get need to get bumped up to whatever gateway minimu you have.

Just to be sure I'm clear on one thing, you're referring to the NC gateway, correct? And regarding top heavy, as long as the populations are the same for who got SHNEC and who should get TH amount, then it's satisified by same 3% NEC?

[pmacduff]

Yes - but beware in a plan that uses "participation" compensation for the SHNEC allocation...if the plan has more than one entry date...because that person is only getting a 3% SHNEC on their compensation from date of participation and will need to get 3% of their full year comp for top heavy....

[masteff]

Yes - but beware in a plan that uses "participation" compensation for the SHNEC allocation...if the plan has more than one entry date...because that person is only getting a 3% SHNEC on their compensation from date of participation and will need to get 3% of their full year comp for top heavy....

That makes sense. Thanks for all the help in understanding.