If an employer makes the 3% QNEC under a safe harbor plan, I understan

[Guest]

If an employer makes the 3% QNEC under a safe harbor plan, I understand that ADP testing is not required, but that ACP testing is if there is a match that does not meet the safe harbor formula. If the safe harbor matching formula is selected, does the plan also automatically pass the ADP test? Thanks.

[MWeddell]

That's not quite right.

If you're using a 3% QNEC to meet the safe harbor requirements, that will also meet the 401(m) safe harbor requirements as long as you don't have a matching formula that violates the restrictions in Notice 98-52, Section VI(B).

If your plan accepts employee after-tax contributions, then those contributions always are subject to 401(m) testing. A safe harbor contribution doesn't eliminate that need for testing.

[This message has been edited by MWeddell (edited 10-07-1999).]

[John A]

My take on Notice 98-52 is that you meet both the ADP and the ACP tests if the ONLY provisions are 1) Basic match OR 2) Enhanced match OR 3) Basic 3%.

You STILL PASS both ADP and ACP if you provide BOTH 3) and EITHER 1) or 2).

IN ADDITION to all of the above, you still pass ACP using safe harbor if you provide additional matching contributions (which could be discretionary) that meet the "Other Matching Contributions" criteria in Section VI. of Notice 98-52 and the "Matching Contributions Generally Must be Required Under the Terms of the Plan" section, including the limit to 4% starting for plan years beginning on or after 1/1/2000. Example 4 in Section VI. seems to be the best example to me.

I agree with MWeddell that if the plan accepts after-tax contributions, then those contributions always are subject to 401(m) testing and will not pass via safe harbor.