Safe Harbor with multiple divisions

[Craig Garner]

I have a 403(b) prospect. 6 operating divisions, same Board of Directors (controlled group). There is one plan document. All divisions can make deferrals (whew!). However, only 3 divisions get a Safe Harbor Match (the other 3 are excluded in the document).

I've never thought about doing this, so I don't know the answer....can a plan exclude employees from a Safe Harbor contribution? Let's assume that the plan would PASS coverage for the employees who are eligible for the SHM (assuming that matters).

I had always thought that a plan had to make SHM contributions to ANY employee eligible to make deferrals, or to those employees who had attained the statutory 21/1 YOS.

If you have cites, that would be great. Thank you.

[Kevin C]

I agree with you that it can't be done in a single plan. For cites, start with 1.403(b)-5(a)(1)(iii) which says the match must satisfy 401(m). Then, 1.401(m)-3© says the SHM must satisfy 1.401(k)-3©. That has the rule you are thinking about. It would also violate the match restrictions in 1.401(m)-3(d)(4) since some of the NHCEs eligible to defer would not receive the match.

A side note, if the 3 divisions excluded from the match are separate 501©(3) entities or are geographically distinct units that qualify for the special rules for universal availability in 1.403(b)-5(b)(3), they could have been excluded from deferrals or excluded from the plan entirely. I think they are sunk for 2015, but IF they qualify for this exception, they may want to look at two separate plans for 2016, one covering the three divisions they want to get the match and the other to cover the three divisions they want to only be eligible to defer. Coverage for the match could be an issue, but they have to worry about that now.