Safe Harbor 401k

[Guest austcomp]

One of our employee is to be made an partner of the company. My understanding is that he would no longer be regarded as an employee and would be given a guaranteed payment instead of a wage.

We have set up a Safe Harbor 401k with the matching formula elected.

My questions are:

1) Is he allowed to continue making elective deferrals?

2) Would the partnership still have to match 6% of his elective deferrals as his "employer"? Is this based on ALL of his compensation?

I apologise if I am not making sense. We are actually an Australian company that operates a LLC over in the US. This whole 401k business is different to the Super Contribution system we have in place here. It's been quite a journey learning all of this!

[QDROphile]

An appropriate answer depends on plan design. In a simple plan design, the change in status would have no effect with respect to the plan contributions, but the total compenstation picure and accounting might change. If you have an exotic design, you will need to consult an expert who can evaluate all of the facts and circumstances -- just another cost of being sophisticated, or whatever one might want to call it. In any event, a keen understanding of plan terms is necessary.