Safe Harbor NEC for eligible EE who quits mid-year...

[J Simmons]

ER sets up a calendar plan year, safe harbor NEC 401k PSP on 6/20/2009, with the PSP effective as of 1/1/2009 but the 401k not effective until 7/1/2009.

EE had service (and age) sufficient to enter the PSP on 1/1/2009, but quit on 4/23/2009. Thus, EE was never eligible to make elective deferrals. So it would follow that EE is not entitled to the 3% of pay SH NEC, even though he is eligible to share in a PS contribution for 2009. Is this correct?

[Tom Poje]

I'd generally say yes since safe harbors only need go to those eligible to defer. unless the document was so poorly written (unintentionally of course) that would require otherwise

[Bird]

I dunno, I would hope this is answered in the document, no? I think it is more likely that this person does get a safe harbor contribution than not; unless eligibility for SH is specifically tied to eligibility to defer.

[J Simmons]

Thanks, Tom and Bird.

The plan and the safe harbor notice language both limit the SH NEC 3%-of-pay contribution to those eligible to make 401k elective deferrals.

My question was really whether the regulations might require the SH NEC for such an EE. From both your answers, it appears not--unless the plan language might have extended such to EEs so situated.

Again, thank you.