Different Eligibility for Different Sources

[Dennis Povloski]

Plan was a straight profit sharing plan and had a 2 year wait on eligibility & 100% vesting. Then, they added a 401(k) feature with safe harbor non-elective contribution. The 401k and SHNEC have 1 year wait. So there are participants that are eligible to make deferrals and receive safe harbor contributions, but not yet eligible to receive profit sharing contributions.

I have 1 HCE that is not deferring, not eligible for SHCEC (which only goes to the NHCEs), and has not met the 2 year wait to become eligible.

I am cross testing this plan.

1. I believe that my NHCEs that are getting the SHNEC must be bumped up to the Gateway as well even if they're not eligible for the PS yet due to the 2 year wait. Is that correct?

2. My 1 HCE that is not getting anything happens to be non-key. Does he get a top heavy contribution because he is eligible for deferrals?

3. Is my 1 HCE included in my non-discrim because he is eligible to make deferrals even though he is not eligible for ps or SHNEC?

Thanks!

[J Simmons]

Plan was a straight profit sharing plan and had a 2 year wait on eligibility & 100% vesting. Then, they added a 401(k) feature with safe harbor non-elective contribution. The 401k and SHNEC have 1 year wait. So there are participants that are eligible to make deferrals and receive safe harbor contributions, but not yet eligible to receive profit sharing contributions.

I have 1 HCE that is not deferring, not eligible for SHCEC (which only goes to the NHCEs), and has not met the 2 year wait to become eligible.

I am cross testing this plan.

1. I believe that my NHCEs that are getting the SHNEC must be bumped up to the Gateway as well even if they're not eligible for the PS yet due to the 2 year wait. Is that correct?

Yes, that is correct. Anyone that is entitled to an ER contribution--including the SHNEC--is entitled to the Gateway.

2. My 1 HCE that is not getting anything happens to be non-key. Does he get a top heavy contribution because he is eligible for deferrals?

Yes, I believe he does.

3. Is my 1 HCE included in my non-discrim because he is eligible to make deferrals even though he is not eligible for ps or SHNEC?

I think if your rate groups for HCEs do not all pass with 70% or better ratio percentages, and you have to do the average benefit percentage test, then yes you'd include this 1 HCE. Since 401k deferrals are included in the ABP test, I think you'd have to include this HCE's deferrals in that test. In the rate group testing itself, I do not think you have to include this HCE unless he is also not a Key EE and receives a TH Min. Then you'd have to test this HCE's rate group.

[Blinky the 3-eyed Fish]

1&2. Yes to both.

3. Because of the SHNEC contribution, the general testing includes all that met the 1 year eligibility requirements. The HCE is included in the tests.