Safe Harbor 401(k) - does the 3% non-elective fully vested contributio

[Guest AngelQ]

Recently we converted to a safe harbor. We will do a 3% non elective contribution. We also have a 50% match, up to 6%. Everything now is 100% vested. Does this 3% non elective match satsify both the ADP and ACP test? Our administrator, Paychex, said "yes". But my reading has left me unsure.

Thank you.

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[Ervin Barham]

Be careful with your terms. If the document will be setup with the 3% "non-elective" contribution (using the word "match" can trip you up) and as long as it complies with the required allocation, vesting and distribution restrictions, you should meet the requirements for ADP/ACP testing.

Review your document carefully when it is prepared to make sure it reads correctly.

[Guest]

Plan is safe harbor 401(k).

This means: No adp/acp test if either

3% Nonelective Contribution given or

100% match up to 3% plus 50% match up to next 2%.

In the example given, the nonelective was made, and the match formula technically does not satisfy safe harbor.

however...

98-52 VI 4 a

a plan that satisfies the safe harbor contribution requirement (nonelective was given) will not fail the ADP safe harbor merely because additional matching contributions were made at employer's discretion.

98-52 VI 4 b

A plan fails...if the plan provides for matching contributions at the employer's discretion, in the aggregate could exceed 4% of the employees compensation.

Thus, it appears your plan is ok. In fact, the match would not even have to be 100% vested.