HCEs excluded from Profit Sharing Contribution

[MarZDoates]

We have a safe harbor 401(k) using the basic safe harbor match to satisfy adp/acp testing.

Client is considering a profit sharing allocation to a select group of employees who are not HCEs (i.e. "middle managers". Since this is not a design based (or non-design based) safe harbor, we will have to pass non-discrim using the general test.

Their document allows them to exclude classes of employees (anyone that does not fall within the middle manager definition) from receiving the profit sharing contribution only. They are still eligible to defer and receive s/h match.

Their document allows them to exclude HCEs from profit sharing only. They are still eligible to defer and receive s/h match.

Plan is NOT top heavy.

Since no HCEs benefit for the profit sharing portion, the plan automatically satisfies coverage and passes general test? Does this sound correct?

I think it's okay....but wanted to bounce it off the experts.

Thanks!

[Lou S.]

From what you describe, it sounds fine.