Safe Harbor 401(k) & top heavy

[R. Butler]

I'm just taking a stab in the dark in hopes I am missing something.

Plan is a safe harbor 401(k) utilizing the match to meet safe harbor. Plan is top-heavy, but has been getting the pass because the only contributions have been deferrals and safe harbor match.

All the key employees defer up to the 402(g) limits plus catch-up if applicable. Plan sponsor wants to make a 1% profit sharing contribution for each employee, but it is not interested in bumping contributions up to 3% for those that require a top heavy minimum.

I don't see that they have that flexibility. If plan sponsor makes any profit sharing contribution they lose the pass. We are aware that matching contributions can count towards top heavy & mitigate some of the minimum contributions, but that won't solve the entire issue.

Am I missing anything here? I don't think so, but I am hoping. Plan sponsor wants to mke a contribution, but wants a level profit sharing contribution for all employees and isn't willing to pony up additional funds to get employees to 3%.

Thanks in advance

[ETA Consulting LLC]

It appear as if you have it figured correctly. The "ONLY" option to get a little closer (adding additional contributions without invoking Top Heavy) would be to allocate additional matching contributions under the ACP safe harbor. This will give a contribution to only those employees who actually deferred, but will keep you under the TH exemption.

Good Luck!

[401_noob]

What about a TH situation where the Plan is a Safe Harbor Plan, but per the Plan Doc the SH contribution is only allocated to NHCEs. There are three employees/participants in the Plan, all HCEs (Husband/owner, Wife, and another participant). For what it's worth, the other participant is an officer, but doesn't make more than the compensation amount to be considered an officer for Key Employee Officer.

Since they are all HCEs, there is not an allocation of SH contributions.

Is this deemed to pass TH?

I failed to mention that the Keys deferred to the Plan.

Thanks!

[Gadgetfreak]

I had researched that with TAG a while ago and got their confirmation that you may exclude non-key HCEs from receiving a safe-harbor match and STILL get a free pass on Top-Heavy.