Waiver of Participation safe harbor 401(k)

[R. Butler]

Prospective client informed us od an employee who was suspicious of a safe harbor 401(k) plan & signed a Waiver of Participation. I understand the issues with waivers (i.e. doucment must allow, irrevocable, etc;). My question relates to a safe harbor plan specifically. Assuming the Waiver of Participation is valid I don't see any reason the participant still can't use safe harbor 401(k) rules. I've looked & don't see anyhting in the safe harbor rules that would prevent such waivers. Am I missing anything?

Thanks in advance for any guidance.

[masteff]

By Waiver of Participation, does that simply mean the employee has elected to not make deferrals or does that mean something more?

[austin3515]

410(b) coverage rules is all that applies. As long as the plan passes coverage, the indidual can opt out and this will not affect the safe harbor status.

Consider a) having the participant's waiver notarized (seriously), and b) consider requesting a psych evaluation (kidding).

[KateSmithPA]

If the participant did, actually, waive out of participation in the plan, is he excluded from the ADP/ACP tests?

[Tom Poje]

a couple of points -

remember, a safe harbor 401(k) plan is simply a 401(k) plan that meets special requirements.

now if the one time elction not to participate wasn't possible, it would be impossible to convert an existing 401k plan into a safe harbor 401k plan if someone had previously waived out.

as for people who 'waive' goodbye to free money in a safe harbor plan, well, I think it must be due to austin arch-enemy using some type of brain malfunction beam.

as for how to handle people who waive out:

to be included in the ADP test, you have to be able to defer. such a person can't, under no condition (which is different than deferring 0) so they would not be included in the ADP test. (It is a moot point in a safe harbor plan)

for coverage, they are includable and not benefiting.

the same would be true for the ACP test.

[KateSmithPA]

Thank you, Tom.

[Tom Poje]

only cuz your my hero being an MD and a PA doing pensions.

[WDIK]

b) consider requesting a psych evaluation (kidding).

I was told of an employee a number of years ago that wanted to waive participation from a vanilla profit sharing plan. The employer fired him for "being too stupid to accept free money."