New Comp with a 3% Safe Harbor NEC

[Guest TomB432]

Is a last day requirement for a discretionary New Comp allocation negated when the plan also has 3% safe harbor contribution when the required gateway contribution is above 3%?

[ETA Consulting LLC]

No. Gateway is not a allocation condition (nor accrual requirement), but a test requirement. You must allocate plan contributions pursuant to the definitely determinable formula outlined in the plan. The plan "may be" written to allow for the gateway allocation (in which case you would be fine), but you may not arbitrarily allocate to meet a testing requirement when that allocation would be contrary to the plan's written terms.

Good Luck!

[BG5150]

but you may not arbitrarily allocate to meet a testing requirement when that allocation would be contrary to the plan's written terms.

What about a 411(g) amendment. Aren't those usually arbitrary and against normal plan allocations?

[Tom Poje]

the 3% SHNEC (which of course can't have allocation conditions) is still a nonelective contribution.

most documents I have seen have a definition of gateway language (in some way shape or form) which would require anyone who receives a nonelective contribution to be bumped up to the gateway.

[Bird]

I agree with the answers above, but they might appear confusing or contradictory depending on what you meant by "negated"...technically a last day provision is not negated, but effectively you have to do something to make sure everyone gets the gateway. The plan may have language which overrides the last day rule, but often you need a 411-g amendment to make it official.

[Tom Poje]

agreed, you probably want to verify the document language.

on the other hand, let's say the plan had 1000 hours requirement. would you give an active person who worked 800 hours a contribution if the plan was top-heavy?

I think most gateway language would be written in similar fashion.