safe harbor match changing each year

[SheilaD]

I have a borderline top heavy plan that is thinking of going to a safe harbor match only for 2010. This plan hovers in and out of top heavy. They have the following idea.

In November, 2009 notice goes to all employees about the safe harbor match;

In February, 2010 we prepare the top heavy calc as of 12/31/2009;

If the plan is top heavy all goes on as planned. If the plan is not top heavy they (with proper notice) stop the top heavy match and revert to ADP/ACP testing. They would fund the match up to that point.

So far - I'm with them -- but they are talking about applying this procedure year after year. I'm wondering if there is a problem with this. Too frequent changing of method?, Too many amendments (assuming they keep bouncing in and out of top heavy?).

Also, I have researched the following on The ERISA Outline book but would like any contrary opinions:

a) You cannot exclude statutory ineligibles from the safe harbor match and maintain the exemption from top heavy (deferral eligibility is immediate);

b) You can exclude certain HCE's - even if not key - from the safe harbor match.

Thanks for any and all thoughts

S

[SheilaD]

Any thoughts on this?

S

I have a borderline top heavy plan that is thinking of going to a safe harbor match only for 2010. This plan hovers in and out of top heavy. They have the following idea.

In November, 2009 notice goes to all employees about the safe harbor match;

In February, 2010 we prepare the top heavy calc as of 12/31/2009;

If the plan is top heavy all goes on as planned. If the plan is not top heavy they (with proper notice) stop the safe harbor match and revert to ADP/ACP testing. They would fund the match up to that point.

So far - I'm with them -- but they are talking about applying this procedure year after year. I'm wondering if there is a problem with this. Too frequent changing of method?, Too many amendments (assuming they keep bouncing in and out of top heavy?).

Also, I have researched the following on The ERISA Outline book but would like any contrary opinions:

a) You cannot exclude statutory ineligibles from the safe harbor match and maintain the exemption from top heavy (deferral eligibility is immediate);

b) You can exclude certain HCE's - even if not key - from the safe harbor match and still get the top heavy exemption.

Thanks for any and all thoughts

S

[John Feldt ERPA CPC QPA]

I see no prohibition against that. Will the ADP/ACP test hurt them much? - They should consider that as a possible cost too. Doing this won't likely help their employee relationship, if that is a concern for them. Be sure the top heavy test gets extra scrutiny during review. Your extra time to do this should justify extra billing.