Minimum Coverage Testing

[Guest Hunter401k]

I am taking over a Plan who allows everyone to contribute to the 401(k)/Safe Harbor portion of the Plan. However it is only the salaried employees eligible for the Profit Sharing portion (it's about 50/50 as to salaried and hourly employees). Am I wrong to think that the Profit Sharing portion also needs to simply pass the 70% test on it's own?

Thanks for your help in advance! I just want to be sure.

[duckthing]

Yes, the 401(a) component can pass the ratio test for coverage separately from the other components. If any of your hourly employees happen to be HCEs (overtime?) that should help quite a bit! Is the safe harbor arrangement a match or a nonelective?

[Mike Preston]

There is nothing preventing you from establishing compliance with 410(b) by way of the Average Benefits Test.

[Stash026]

duckthing - I believe it is a Safe Harbor Match. Everyone is eligible, assuming the reach Eligibility (21 & 1).

They want to add the Profit Sharing, so working out the testing separately. Initially they only wanted to cover the salaried employees, but there aren't enough non-highly to pass the 70% coverage

[austin3515]

There is nothing preventing you from establishing compliance with 410(b) by way of the Average Benefits Test.

[Full disclosure: This response was plagiarized].