Client wants 3% safe harbor minimum provided under a money purchase pl

[jkharvey]

I would like to know how administrators are handling adoption agreements for a 401k safe harbor. My client wants to provide the 3% minimum in another plan (his MPPP) that will actually provide a 4.25% contribution. The ER wants to provide 100% vesting for only the 3% safe harbor contribution. The remaining 1.25% contribution will be subject to a graded vesting schedule. How can I do this on a prototype adoption agreement? What are others doing with this issue?

Any comments are appreciated.

[Guest Chains]

I don't see how you could do this in a prototype. I think you'd have to add an Addendum and effectively take the plan out of prototype status (you could still use the basic plan document if it has appropriate vesting language & the AA, but it would not be an actual prototype plan).

[Earl]

agreed. Prototypes didn't consider this contribution and so it can't be covered. You can always file down the line.

[Guest JF]

Lets try this one. To the best of my knowledge, no one has a prototype plan document with approved language for the post 1998 Safe Harbor rules. The position on this is that the 401(k) plan adopting the Safe Harbor provision must cmply with the terms of the Safe harbor, but no document change is yet needed. The safe harbor notice and complying with the operational requirements of the safe harbor rules is all that is needed. Using a standardized prototype, you would have the company make regular profit sharing contributions which are subject to vesting. This would be your 1.5% or any amount over the 3%. The 3% for he safe harbor will be 100%, treated basically as a QNEC. Most prototypes allow for QNECS that are alwas 100% vested. You will need to have a few diffierent "buckets" in your recordkeeping system, one for deferrals, mach if any, profit sharing subject to vesting, and the safe harbor non-elective that is 100% vesed. I see no reason why you can't do what you want with a baic standardized prototype plan for now until safe harbor languange is available in the prototype.

[jkharvey]

jf, thanks for your response. The problem I'm having, however, is that the 4.25% contribution is being made in a Money Purchase Plan. Can I have a separate vesting schedule for the 3% that will count for safe harbor contribution and the remaining 1.25% on a prototype document for the MPPP?