SARSEP 125% NHCE deferral percentage and 3% employer contribution

[Guest Steve Palmer]

If the employer contributes 3% can HCEs defer $10,000, or are they stuck with the 125% of NHCE percentage? The 3% does not push the HCE over 15%.

Thank you.

[Kathy]

The 3% minimum top-heavy employer contribution required under a Model SARSEP does not eliminate the need to do the nondiscrimination test on the salary deferrals. The HCE's slary deferal is still limited to the lesser of $10,000 or 125% of the average deferral percentage (diluted by those who are eligible but choose not to contribute anything) of the Non-HCE group.