Suspending SH Match Mid-Year

[Guest LmD]

When you are performing the adp/acp testing required once Safe Harbor Match is removed mid year, do you test on full year compensation or do you have to pro-rate the compensation to the point of supsension of the SH Match? The concern I heard is that someone (owners)would front end their contributions prior to the suspension in order to receive the maximum benefit.

[austin3515]

The test is run for the full year. The entire year is a non-safe harbor plan year, even though the match was provided for part of the year.

[Guest LmD]

I sat in on a Webcast yesterday and the speaker discussed proposed regs and not forgetting to pro-rate the salary. He went further to say that ASPPA challenged this at a hearing on 9/23. This was the first I had heard of this and was concerned that we were performing our tests incorrectly by not pro-rating the compensation. Any thoughts?

[rcline46]

In the proposed regs for removing the non-elective SH, the pro-rating was to the cessation date and the calculation of the 3% non-elective.

[justatester]

What if it is a safe harbor match that was contributed for 6 months? Do you only use the compensation from those 6 months or can you use full year compensation for the ACP test?

[rcline46]

You test ALL deferrals and ALL match contributions for the year against ALL compensation for the year. It is as if the Safe Harbor did not exist.