Safe Harbor 401(k) with different eligibility rules

[Guest Grumpy456]

Company A sponsors a single safe harbor 401(k). Company A has an office in Dallas and an office in Tampa. The safe harbor 401(k) plan is set up so that employees in the Dallas office are eligible to make deferrals and to receive safe harbor contributions immediately after completing 6 months of service. Employees in the Tampa office are eligible to make deferrals and receive safe harbor contributions after completing a year of service and attaining age 21. May a single safe harbor 401(k) plan apply these different eligibility rules? Thanks.

[Tom Poje]

hmm.

let's suppose a family member of an owner in the Dallas office is hired. you would have an HCE eligible to receive a safe harbor before NHCEs who worked the same length of time as those from the Tampa office. that would seem to me to violate the intent of having a free ride on the ADP test.

[Guest Grumpy456]

I agree; I am trying to determine whether it is a testing issue (maybe OK, maybe not, depending on testing) or if there is a specific prohibition in the rules (that I cannot find)--or a requirement that a safe harbor use a single set of eligibility rules FOR THE SAFE HARBOR CONTRIBUTION. Thanks.

[Tom Poje]

at the minimum I'd say you lose your top-heavy free card.

if it was two separate plans you could not aggregate (in the regs it is clear you can't aggregate a safe harbor and a non safe harbor, and somewhere it is indicated you have to have the same safe harbor (e.g. you can't aggregate two plans if one is basic match and another 3% SHNEC)

but you particular situation in which you only have one plan, I have no idea.

good luck.