Safe Harbor Plan with New comp

[Guest Doug Rosing]

I have a question concerning a safe harbor 401(k) plan with a new comp feature. If a plan elects to use the 3% Qnec to satisfy the ADP safe Harbor how does it effect the new comp calculation. I believe that the Qnec is used in the average benefit percentage calculation to determine top-heavy but is not used in the rate group calculation. However, if the Qnec is classified as a fully vested profit sharing contribution can it be used in the rate group calculation.

All responses are greatly appreciated.

[lkpittman]

I think you mean a "safe harbor non-elective 3% contribution," not a "qnec." Anyway, I believe the answer to your question is "yes," the 3% non-elective safe harbor is included in the allocation used to satsify 401(a)(4) nondiscrimination requirements (cross-testing) and the amounts may also be used to satisfy the top heavy minimum contribution requirements. For example, if your NHCEs (usually same as non-keys) are receiving 5% in order to pass using cross-testing, this allocation will satsify the 3% non-elective safe harbor (so long as 3% is 100% vested and not contingent on employment on last day of plan year) as well as the top-heavy requirement.

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LKP

[This message has been edited by lkpittman (edited 06-03-99).]