Safe Harbor plan with Discretionary Match that qualifies as a Safe Harbor for ACP Testing

[msmith]

The Plan has a 3.5% Safe Harbor Non-elective feature. Even if a Discretionary Match qualifies for Safe Harbor ACP, can we elect to use it in the ACP Test?

The document is silent on this and I would like to include as the Voluntary After-Tax contributions, alone, will cause the ACP to fail.

[austin3515]

You don't qualify for the ACP Safe Harbor if you have after-tax. Now if you said you qualified for the safe harbor and you don't then you've got a document problem.

[Lou S.]

You don't qualify for the ACP Safe Harbor if you have after-tax. Now if you said you qualified for the safe harbor and you don't then you've got a document problem.

I think he means they have a discretionary match that would be exempt from ACP testing absent the after tax contributions.

[msmith]

Lou - that is correct. The Match is discretionary and would normally be exempt from the ACP Test. I could find nothing on the inclusion of the Voluntary After-Tax voiding the Safe Harbor ACP exemption.

[austin3515]

OK I change my answer. You are "permitted" to disregard the match but clearly you don't have to.

(6) Plan must satisfy ACP with respect to employee contributions. If the plan provides for employee contributions, in addition to satisfying the requirements of this section, it must also satisfy the ACP test of § 1.401(m)-2. See § 1.401(m)-2(a)(5)(iv) for special rules under which the ACP test is permitted to be performed disregarding some or all matching when this section is satisfied with respect to the matching contributions.

See § 1.401(m)-2(a)(5)(iv)
(iv) Matching contributions taken into account under safe harbor provisions. A plan that satisfies the ACP safe harbor requirements of section 401(m)(11) or 401(m)(12) for a plan year but nonetheless must satisfy the requirements of this section because it provides for employee contributions for such plan year is permitted to apply this section disregarding all matching contributions with respect to all eligible employees. In addition, a plan that satisfies the ADP safe harbor requirements of § 1.401(k)-3 for a plan year using qualified matching contributions but does not satisfy the ACP safe harbor requirements of section 401(m)(11) or 401(m)(12) for such plan year is permitted to apply this section by excluding matching contributions with respect to all eligible employees that do not exceed 4 percent (3 1/2 percent in the case of a plan that satisfies the ADP safe harbor under section 401(k)(13)) of each employee's compensation. If a plan disregards matching contributions pursuant to this paragraph (a)(5)(iv), the disregard must apply with respect to all eligible employees.

[msmith]

Perfect. Thank you!