401(k) Safe Harbor and Union Employees

[Gilmore]

I understand that if a safe harbor 401(k) plan limits the safe harbor contribution to only the statutory employees and disaggregates the otherwise excludable employees, then the plan cannot use the special rule deeming the plan to not be top heavy as it no longer is solely a safe harbor 401(k) plan.

Does the same thing apply if the plan does not provide safe harbor contributions to union employees.

An employer with a top heavy safe harbor 401(k) plan is considering allowing union employees to participate. If the union employees do not receive the safe harbor contributions is the plan no longer deemed to be not top heavy?

Thanks.

[Belgarath]

I'm going from memory only without any research, so this opinion and a dollar will be worth a dollar.

I seem to recall that under the disaggregation rules of 1.410(b)-7, there is disaggregation of the collectively bargained and non-collectively bargained portions of the plan. So I THINK you can exclude the union employees from the safe harbor portion without having that provision, in and of itself, blow your top heavy exemption.

[Lou S.]

I think it may be a bit more complicated but I too am going from memory.

I believe you can disaggregate the groups for most testing but not 416 if they are in the same plan. However, I believe you can draft the plan such that the collectively bargained employees are excluded from the t-h minimum. I also believe you can only exclude them from the T-H minimum if there are no collectively bargained key-employees employees.

All this is to say, I'm not sure but I do believe including the collectively bargained employees in the plan but not giving them the safe harbor contribution will blow your free pass T-H exemption on the plan.

You could have a second plan that covered only the union employees but that is a separate issue that I t hink you are trying to avoid.

But again I'm going on memory which seems to get worse every year.