Safe Harbor Plan with no contrib for NHCEs OK?

[Lynn Campbell]

I have seen proposals showing an ER with a 10% MP Plan and a safe harbor 401(k) Plan in which the only contrib is the HCE Deferrals of $10,000/year. Assume plans top-heavy, and there are only 3 EEs total. Is it OK to have NO contrib to the safe harbor plan for NHCEs due to the 10% Money Purchase contrib for all EES - is the safe harbor match covered by the Money Purchase contribution?

Thanks very much for input.

[MWeddell]

The safe harbor contribution of at least 3% of pay to all eligible employees may be made to a different plan. Hence, from what you've said, it might qualify as a safe harbor plan, but Notice 98-52 contains a host of pitfalls so you'll have to look at it carefully.

Also, the employer can't have only the HCE eligible for the 401(k). Check out that the NHCEs are eligible but merely decided not to contribute.

[kocak]

Also note the 3% safe harbor contribution would have to be 100% vested.