safe harbor plan

[Gary]

An employer has a basic match safe harbor 401k plan that provides the basic match to all employees, including HCEs.

The two owners want to maximize their deduction for their 401k and db plans.

they are not covered by PBGC so if their DB contribution is greater than 25% of payroll their DC deduction limit is 6% covered pay.

In order to avoid exceeding 6% to 401k plan the owners can waive their 401k match.

I didn't come across anything specifically allowing this, but is it ok?

Thanks.

[Jim Norman]

Probably not, need to read the plan document. Of course the owners could reduce their deferrals to reduce their match.

As an aside, if the match is the basic SH match (100% on the first 3% and 50% on the next 2%), how is the match contribution exceeding 6%? Wouldn't it be limited to 4%?

[Gary]

Yes they can reduce their elective deferral as an option. Agreed.

They also make profit sharing contributions that's how it would exceed the 6%

Thanks

[Jim Norman]

If the profit sharing document uses the "each participant is a separate group" allocation language, then the company could limit the PS contributions to the owners to keep the overall employer contribution to 6%.

[Tom Poje]

going forward, you could amend the document to exclude the owners from the safe harbor since they are HCEs.

If I recall, depending on when the contributions are deposited, you may be able to deduct some of the contribution in the following year.

[Gary]

Yes, we can amend plan to remove SH match for owners.

The overall limit exceeds 6% due to the match plus the 7.5% gateway for the NHCEs. Plan is combined with defined benefit plan.

So we would need to reduce the owners match.

Can elective deferrals be removed after they have been contributed? Not referring to excess deferrals.

Of course from this point on owners can stop making deferrals.

Thanks.

[Tom Poje]

deferrals don't cont toward the deductable limit, so not sure how or why that would come into play.

no, deferrals should not be removed if they are not excess deferrals

[Gary]

the deferrals are relevant since they impact the basic match and the match is an employer deductible contribution that does count toward the 6% limit.