SH Plan Design using both Non-Elective & Match

[RAPD]

Is it possible to design a plan using a Safe Harbor basic match for anyone who is contributing and also simultaneously use a Safe Harbor non-elective for anyone who does not contribute?

[K2retire]

Why would they want to do that?

[Lou S.]

No. You do one or the other.

You can do something close to what you want by doing a 3% safe harbor non-elective and a fixed of match of say 20% of the first 5% deferred. That way everyone gets the 3% safe harbor and those contributing at 5% would get the extra 1% which is where they would be under a safe harbor match.

[Tom Poje]

I don't think you can do that

1.401(k)-3(a) says

if arrangement satisfies (b)[3% nonelective

or © safe harbor match

(b) requires all eligible NHCEs to receive but what you suggest does not provide it to those who are deferring

[RAPD]

I'm reviewing a plan that seems to be designed this way and so i am questioning what the reasoning was behind this design.

There are 4 participants total, 2 HCEs and 2 NHCEs.

The HCEs are the only one's deferring and they are deferring the max and getting the 4% match. They are not receiving the 3% SH non-elect. They are also getting a small profit sharing contribution.

The NHCEs are not deferring but are being provided with the 3% SH non-elective plus a 2% profit sharing.

[Belgarath]

Is this plan a pre-approved prototype/volume submitter? Or an IDP?

[RAPD]

Is this plan a pre-approved prototype/volume submitter? Or an IDP?

Volume Submitter

[Belgarath]

Have you posed this question to the document provider? While I'm dubious that this would be a permissible option in the document, (in other words, possibly completed incorrectly) it could be possible that the IRS approved it - especially if there are certain overrides, etc.

Are there any "overrides" such that "but if 'x' happens then 'y' election is no longer valid and 'z' applies to all participants" - or something along those lines?

[Lou S.]

If their intention was to maximize the HCEs sounds like they did not choose the most efficient path.

They simply could have given everyone a 3% SH

Given a discretionary match not to exceed 4% of pay and not to match deferrals in excess of 6% of pay. Essentially a 4% match for the HCEs.

Then given a cross tested PS and required gateway to top up the HCEs to where they wanted to be.

It would have worked in the regulatory framework and been easier to do.

I'm still pretty sure can't say "we are giving some folks the SH match and other the SHNEC."

Did the VS plan submit for a letter based on this method?

Also is it possible the TPA did it the way I describe but the client mistakenly deposited to the wrong sources with the custodian?

[BG5150]

I'm reviewing a plan that seems to be designed this way and so i am questioning what the reasoning was behind this design.

There are 4 participants total, 2 HCEs and 2 NHCEs.

The HCEs are the only one's deferring and they are deferring the max and getting the 4% match. They are not receiving the 3% SH non-elect. They are also getting a small profit sharing contribution.

The NHCEs are not deferring but are being provided with the 3% SH non-elective plus a 2% profit sharing.

This way, the HCEs are getting a bigger SH than the rank and file. What about that DOESN'T scream discrimination?

[RAPD]

I'm reviewing a plan that seems to be designed this way and so i am questioning what the reasoning was behind this design.

There are 4 participants total, 2 HCEs and 2 NHCEs.

The HCEs are the only one's deferring and they are deferring the max and getting the 4% match. They are not receiving the 3% SH non-elect. They are also getting a small profit sharing contribution.

The NHCEs are not deferring but are being provided with the 3% SH non-elective plus a 2% profit sharing.

This way, the HCEs are getting a bigger SH than the rank and file. What about that DOESN'T scream discrimination?

Just to play devils advocate... It's not discriminatory because the NHCE's have the opportunity to defer and receive the SH Match as well as the 3% if i understand this correctly. Or whichever is greater?

[Tom Poje]

Agree

there is no reason a plan couldn't have both SHMAC and SHNEC, and exclude the HCEs from the SHNEC. if the NHCEs are not deferring then they don't get the match, but that is different then saying a plan provides a safe harbor match to the HCEs and a 3% SHNEC to the NHCEs.