Combined DB/DC, Safe Harbor,and Top Heavy

[retbenser]

Sponsor has top-heavy DB + DC combo

DC is made up of deferral + safe-harbor match + discretionary profit sharing

Safe-harbor match = 3% + 50% of next 2% (max of 4%)

Since the combo is TH, all employees must get 5% DC contribution

Does this mean that the discretionary profit sharing contribution must make up the difference so that the match + PSP = 5%

For example,

Participant #1 does not have deferral, and therefore no match. this mean the PSP is 5%?

Participant #2 has 6% deferral with 4% match. therefor his PSP is PSP 1%?

(In this situation, is it better to remove the match and move to a non-elective 5% PSP contribution for all participants?)

[Lou S.]

For example,

Participant #1 does not have deferral, and therefore no match. this mean the PSP is 5%?

Participant #2 has 6% deferral with 4% match. therefor his PSP is PSP 1%?

(In this situation, is it better to remove the match and move to a non-elective 5% PSP contribution for all participants?)

If your plan offsets T-H for match received, yes on P#1 & P#2.

Is it better to switch? Maybe. Depends on turnover and what you are providing. I'd guess that a 3% NE safe-harbor would problably work best with 2% t-h and additional gateway if needed but without seeing demographics and knowing the employer's objectives it's just a guess.

[retbenser]

For example,

Participant #1 does not have deferral, and therefore no match. this mean the PSP is 5%?

Participant #2 has 6% deferral with 4% match. therefor his PSP is PSP 1%?

(In this situation, is it better to remove the match and move to a non-elective 5% PSP contribution for all participants?)

If your plan offsets T-H for match received, yes on P#1 & P#2.

Is it better to switch? Maybe. Depends on turnover and what you are providing. I'd guess that a 3% NE safe-harbor would problably work best with 2% t-h and additional gateway if needed but without seeing demographics and knowing the employer's objectives it's just a guess.

Thanks!

[ScottR]

Sponsor has top-heavy DB + DC combo

DC is made up of deferral + safe-harbor match + discretionary profit sharing

Safe-harbor match = 3% + 50% of next 2% (max of 4%)

Since the combo is TH, all employees must get 5% DC contribution

Does this mean that the discretionary profit sharing contribution must make up the difference so that the match + PSP = 5%

For example,

Participant #1 does not have deferral, and therefore no match. this mean the PSP is 5%?

Participant #2 has 6% deferral with 4% match. therefor his PSP is PSP 1%?

(In this situation, is it better to remove the match and move to a non-elective 5% PSP contribution for all participants?)

That wouldn't be a very good plan design, IMO. Word will quickly spread to employees that they're going to get 5% of pay, whether or not they defer. IOW, the match is bogus.

I think you'd be better off with the flat 3% SH. It could be used for TH purposes, gateway minimums, and rate group testing. Triple duty.

.. Scott