3% Safe Harbor

[mariemonroe]

Can a 3% safe harbor plan have a 1 year wait on allowing employees to enter the plan for purposes of making elective deferrals and a 2 year wait for purposes of receiving employer contributions (profit-sharing and safe harbor)?

[Tom Poje]

you can not have a 2 year wait for the safe harbor.

you are getting a free ride on the ADP test, and that includes deferrals, which at max can have a 1 year wait.

the only out the that is permitted would be if you had immediate eligibility, and then you can exclude otherwise excludbales. (because you could have tested them separately if you didn't have a safe harbor.)

you can always have a 2 year wait for other profit sharing, but then remember you now have ees receiving different levels of nonelectives

[mariemonroe]

you can not have a 2 year wait for the safe harbor.

you are getting a free ride on the ADP test, and that includes deferrals, which at max can have a 1 year wait.

the only out the that is permitted would be if you had immediate eligibility, and then you can exclude otherwise excludbales. (because you could have tested them separately if you didn't have a safe harbor.)

you can always have a 2 year wait for other profit sharing, but then remember you now have ees receiving different levels of nonelectives

Thanks

[Trekker]

Since the 3% safe harbor is part of the profit sharing contribution, could you have a 2-year wait but run the ADP on deferrals of participants who have not met the 2-year requirement? Most would be Non-HCEs, anyway.

[Guest Sieve]

No. The 3% SH NEC must be made to "each eligible NHCE", i.e. each participant eligible to make a salary deferral (Treas. Reg. Section 1.401(k)-3(b)(1) & -6.)--and you can't have a 2-year wait for the deferrals.