Otherwise excludables and safe harbor

[rlb64]

Employer plan provides deferrals and match after 6 months, no age requirement. Effective 2009, the employer wishes to offer a safe harbor match to participants who are not otherwise excludables but not require age 21. They also want to offer a less generous match to the otherwise excludables until they are eligible for the safe harbor match. Is this ok?

To top it off, they currently offer a unique match formula: the greater of 100% of deferrals up to $20 (per pay) or 50% of deferrals up to 4% of pay. If they were to change to safe harbor, is it possible to ensure that noone's match is less than what the participant would have received under this current formula?

[Tom Poje]

well, the regs say you can have a safe harbor plan and provide the safe harbor to only those who are statutory includable (you give up top heavy free in that situation)

it sounds like you want to take it one step further:

1. safe harbor match to statutory includable

and

2a. safe harbor match to otheriwse excludable who are over age 18

2b. some type of match to remaining otherwise excludable

possibly keeping track of things might be fun, but I can't see why you couldn't do that. hopefully you wont end up with an HCE in the otherwise excludable group, because of course you still have testing in that case. would have to be individual designed document I'm sure.

I don't believe you can do a 'greater of' match formula without possibly running into problems with the 'rate of match' issue - different people receiving at a different rate.