Safe-harbor 401(k) combined w/ Cross Tst

[Guest SPollock]

Question: If I set up a Cross Tested Profit Sharing Plan with a 3% Top Heavy contribution to NHCEs,can I use the 3% contribution as the minimum contribution to satisfy the minimum profit sharing contribution for the Safe Harbor 401(k) Plan or do I need to do a separate 3% for the 401(k) plan? Could the HCE then contribution $10,000 (Salary $160,000)to the 401(k)?

[MWeddell]

I think the answer is "yes," but would also like to hear from others.

Note that when you cross test the 3% safe harbor nonmatching contribution, you may not impute permitted disparity. Also, you'll need to meet the other IRS requirements for the safe harbor contribution including no last day of the plan year condition, 100% vesting, distribution restrictions, etc.

[Guest SPollock]

Thank you for the help and I appreciate any additional assistance on this question. I'm a little confused by the statement, "you may not impute permitted disparity." What is meant by impute permitted disparity?

[Guest CTYSON]

See IRS Notice 98-52 (click) re ability to use the 3 percent safe harbor contribution in doing cross-testing as well

[Note: This message has been edited by Dave Baker]

[MWeddell]

Impute permitted disparity