PS to 401(k) Safe Harbor-Mid Year Question

[BTH]

An existing Profit Sharing Plan is amended to a Safe Harbor 401(k) on 7/1/2008. Although the 401(k) deferrals start effective 7/1, the 3% Safe Harbor contribution is based on the full year compensation. A participant terminates employment on 2/28/2008. Is this participant eligible for the 3% Safe Harbor? The Plan defines eligibility for the Safe Harbor as "a Participant who is eligible to make Elective Deferrals under the Plan for any part of the Plan Year." Since the participant terminated prior to being able to make any Elective Deferrals, I'm thinking that the terminated participant may be excluded here. Any thoughts?

Thanks.

[Cynchbeast]

An existing Profit Sharing Plan is amended to a Safe Harbor 401(k) on 7/1/2008. Although the 401(k) deferrals start effective 7/1, the 3% Safe Harbor contribution is based on the full year compensation. A participant terminates employment on 2/28/2008. Is this participant eligible for the 3% Safe Harbor? The Plan defines eligibility for the Safe Harbor as "a Participant who is eligible to make Elective Deferrals under the Plan for any part of the Plan Year." Since the participant terminated prior to being able to make any Elective Deferrals, I'm thinking that the terminated participant may be excluded here. Any thoughts?

Thanks.

My thought is the same. They were never eilgible to make deferrals, so not eligible for SH. But I have never run into this, so what do I know?

[K2retire]

Will you have coverage or non-discrimination problems if this person doesn't get the SHNE contribution?

[BG5150]

Will you have coverage or non-discrimination problems if this person doesn't get the SHNE contribution?

Why would coverage be an issue? The person was no longer an employee when the deferrals (and, hence the Safe Harbor) feature kicked in.