ombskid Posted March 10, 2011 Posted March 10, 2011 If an employee becomes eligible midyear (1st day of 7th month) in a top heavy safe harbor 401k plan, does a 3% Non elective safe harbor contribution based only on compensation while eligible, satisfy the top heavy requirement for that participant for the year.
401king Posted March 10, 2011 Posted March 10, 2011 If an employee becomes eligible midyear (1st day of 7th month) in a top heavy safe harbor 401k plan, does a 3% Non elective safe harbor contribution based only on compensation while eligible, satisfy the top heavy requirement for that participant for the year. The answer to your questions is plan-specific and should be outlined in the provisions of the plan. You can make definition of compensation for safe harbor contribution purposes to only include compensation from the date of entry. R. Alexander
BG5150 Posted March 10, 2011 Posted March 10, 2011 If the SH contribution is based only on participation compensation, then it would not completely cover the Top Heavy, TH has to be based on 415 comp, which, if I remember correctly, doesn't allow for exclusion of pre-participation comp. QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
Guest Sieve Posted March 10, 2011 Posted March 10, 2011 Yes. If the SH plan has no contributions other than deferrals and the SH contributions, then the Plan meets TH without being required to use full-year comp (if the SH contribution is only based on comp after entry).
ombskid Posted March 10, 2011 Author Posted March 10, 2011 If an employee becomes eligible midyear (1st day of 7th month) in a top heavy safe harbor 401k plan, does a 3% Non elective safe harbor contribution based only on compensation while eligible, satisfy the top heavy requirement for that participant for the year. The answer to your questions is plan-specific and should be outlined in the provisions of the plan. You can make definition of compensation for safe harbor contribution purposes to only include compensation from the date of entry. If the plan does define compensation for safe harbor purposes to only include compensation from date of entry does that satisfy the top heavy minimum for the plan for the year for that participant?
Tom Poje Posted March 10, 2011 Posted March 10, 2011 again, if there are no other contributions, the plan has landed on CHANCE and picked up a card that says "Get out of top-heavy for free". there simply is no top heavy and the point is an elephant or irrelevant or something like that. If there are other contributions, then the card is no good and you must provide enough to satisfy top heavy based on full year comp. If you only provide the SHNEC to statutory includable and exclude otherwise excludables, that also blows the get out of top-heavy free.
BG5150 Posted March 10, 2011 Posted March 10, 2011 If the plan does define compensation for safe harbor purposes to only include compensation from date of entry does that satisfy the top heavy minimum for the plan for the year for that participant? If a TH minimum indeed applies: NO. Use 415 Comp. QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
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