Suspending Safe Harbor Match-Top Heavy

[Guest JCM]

Is there any way a small plan can suspend Safe Harbor Match mid-year and continue 401(k) for NHCE's without top-heavy contribution? Spouse of HCE has made 401(k) contributions.

[sdix401k]

I am only aware of the ability to suspend the Safe Match becuase of a severe business financial hardship. In that event you would still need to provide TH contribution.

Were the deferrals less than 3% of salary?

[PensionPro]

Plan needs to be safe harbor for entire year to qualify for top heavy exemption. You can amend the plan with 30 days notice to reduce or eliminate the SH match, and apply ADP and ACP tests for the entire year. The match is counted as top heavy contributions.

If an employer terminates a SH plan mid-year due to financial hardship or a corporate transaction, the plan retains SH status for the short year.

[Guest JCM]

Is there any way a small plan can suspend Safe Harbor Match mid-year and continue 401(k) for NHCE's without top-heavy contribution? Spouse of HCE has made 401(k) contributions.

Unfortunately, the spouse has made deferrals of more than 3% of her salary. Thanks for your input.

[Guest JCM]

Follow-up related question. Would the same plan be able to terminate the SH Match plan, start a new Traditional 401(k) plan for the NHCE's, merge the two plans together and avoid Top Heavy for the year.

[ETA Consulting LLC]

Follow-up related question. Would the same plan be able to terminate the SH Match plan, start a new Traditional 401(k) plan for the NHCE's, merge the two plans together and avoid Top Heavy for the year.

No. That would be the classic definition of a 'successor plan'.

Good Luck!