Excluded Employees ADP/ACP Safe Harbor

[Guest rwells@unioncentral.com]

We have a safe harbor plan that has a non-adopting controlled group member who according to our document would have all employees automatically excluded from participating in the plan. We are running into the argument of whether this eliminates them from safe harbor status since these excluded employees are not receiving the same level of benefit as the other employees.

Can we rely on the safe harbor as long as they pass coverage under the 410(b) ratio test?

[Laura Harrington]

We have a safe harbor plan that has a non-adopting controlled group member who according to our document would have all employees automatically excluded from participating in the plan. We are running into the argument of whether this eliminates them from safe harbor status since these excluded employees are not receiving the same level of benefit as the other employees.

Can we rely on the safe harbor as long as they pass coverage under the 410(b) ratio test?

Yes.

Treas. Reg. 1.401(k)-3(b) states the safe harbor contribution must be made to each "eligible NHCE". Treas. Reg. 1.401(k)-6 defines an eligible NHCE to be an employee who is eligible to make elective contributions under the 401(k) arrangement.