Safe Harbor Allocation Forced to Cross-Test

[Dougsbpc]

Suppose you have a 401(k) plan with salary deferrals and profit sharing.

Each year the employer makes a 15% P/S contribution and it is allocated comp / comp.

This year they fail the ADP Test. The document allows them to carve the amount necessary to pass the ADP test by classifying that amount as a QNEC.

Suppose 4% of the 15% becomes a QNEC for the two NHCE's. Does that then require us to cross-test?

Does the fact that the 4% QNEC is used for ADP testing then mean only 11% is considered a "Nonelective Contribution" and then subject them to cross-testing?

[Blinky the 3-eyed Fish]

First, I assume you are following your document. Second, because (a)(4) must be passed both with and without the QNEC, you do have a non-safe harbor allocation without the QNEC and must run the general test.

[Tom Poje]

but you do not have only 11% nonelective. the 4% QNEC is still a 'non elective', but as the wise fish said, you still have 2 tests to run - one with and one without, though of course the test including all nonelectives would pass