Contingent Benefit Rule - 401(k) Deferrals Limited Based on NQDC Deferrals

[EBECatty]

Would appreciate any input on the following:

Employer maintains an NQDC plan that allows elective deferrals and other employer contributions. (Every participant in the NQDC plan is an HCE.) The NQDC plan allow employees to defer up to 100% of their salary remaining after all payroll deductions.

Employer's 401(k) plan says any 401(k) participant who defers into the NQDC plan for the plan year may only defer a maximum of 4% of compensation into the 401(k) plan.

Read literally, this only violates the contingent benefit rule if the NQDC plan deferrals are restricted based on the employee's 401(k) deferrals (or lack of deferrals). Here, the NQDC plan is silent on the issue, but the employee's 401(k) deferrals are limited.

Permissible? Or "indirect" condition on NQDC participation?

We've received a favorable DL with the plan language, but with reliance running out fairly soon, I'm interested in hearing input.