Company wants to implement a Safe Harbor NE Contrib of 4% of pay instead of 3%...permissible?

[CharlesLeggette]

I know a Safe Harbor Match of 100% of deferrals up to 6% of pay is permissible, but I've never had someone ask that a Non-Elective SH be 4%....

Realistically, you could just have a 3% NE SH and a fully vested 1% discretionary but then they'd go into different buckets in the R/K system...

Thoughts would be appreciated.

[401king]

4% non-elective is fine, but your approach would be more beneficial to the Plan Sponsor.

[Tom Poje]

many of the newer documents for the safe harbor nonelective simply say something like


a. Is this a safe-harbor plan exempt from most testing:
i. [ ] No
ii. [ ] Yes - safe harbor match
iii. [ ] Yes - non-elective contribution, not less than ____% of Compensation
iv. [ ] Yes - non-elective contribution, not less than ____% of Compensation but only if the Plan Sponsor amends the Plan and provides a supplemental notice

so you could fill in 3% and then provide more

or I have seen it worded ....non-elective contribution of at least 3%

[GMK]

Could you fill in 4% instead of 3%?

[Belgarath]

Sure, why not?

[Flyboyjohn]

Agree that you can always do more than the statutory minimums, had an extreme case where employer wanted to provide 8% to contributors and nothing to non-contributors so SH match formula was 400% of first 2% deferred

[BG5150]

I thought that a SH match could not match more than 6% of deferrals (FBJ's example doesn't) and also not yield more than 4% of compensation (which this example does).

[Tom Poje]

BG5150 - yes and no

you could have, for example, an enhanced match of 100% up to 9% deferred

it satisfied ADP safe harbor

but the amounts matched above 6% would not satisfy ACP safe harbor

so you can run an ACP test on

1. all match

or

2. exclude amounts that do not exceed 4%

or something like that

[GMK]

Isn't the point of Safe Harbor to avoid having to do testing?

or is it that since the computer runs the tests for every plan anyway, then if you're sure you'll pass, just go ahead and do what you want to do?

[Kevin C]

I thought that a SH match could not match more than 6% of deferrals (FBJ's example doesn't) and also not yield more than 4% of compensation (which this example does).

The safe harbor rules limit discretionary matches to no more than 4% of comp. That limit doesn't apply to a fixed SH match.