QACA Safe Harbor

[justatester]

We have a plan that has a "safe harbor" formula of 100% of first 3%, then 50% of next 6%.  I believe this formula satisfies the ADP safe harbor, but not ACP. Unfortunately, that formula does fit on to the volume submitter document that we use.  The document was drafted for the "qaca" contribution of 100% of 3% 50% of next 3%.  Then a "supplemental" match of 0% up to 6% and 50% on 7-9%. 

Does this make sense? Is there any other discrimination testing that is needed? BRF?  If this is permitted would it be ok to recordkeep the "2" matches in same source?

Any thoughts would be appreciated...

[401king]

Safe Harbor cannot recognize deferrals in excess of 6% of salary; the first formula would not pass ADP. You would have to run ACP test on your 2nd formula, too. 

[justatester]

My mistake I should have included that this was QACA Safe harbor.  Does that change you opinion?

[Tom Poje]

it doesn't matter if it is a basic safe harbor, an enhanced safe harbor or a QACA

for ADP safe harbor you can match anything, but ACP safe harbor is limited to 6% of comp (in the eyes of the govt you can't expect most 'common' folk to be able to defer above that level.

the way you described  your formula, you basically have

100% up to 3%

and 50% up to 6%

0% between 6 and 7%

and then 50% from 7 to 9%

that would fail the requirement that match doesn't increase as deferrals in crease.

if you really meant

100% up to 3%

and 50% up to 9% then you have ACP testing because match is on more than 6% of comp.

just how many folks (besides HCEs) are going to be able to defer above 6%?

[justatester]

well, in the plan document it is written as 100% to 3, 50% up to 6% as the QACA.

Additional "non-safe" harbor match is 0% up to 6%, 50% on deferral that exceed 6% but not 9%.

The previous plan document was 100% up to 3%, 50% up to 9%, but as mention, the current document does not permitted that so the wrote it as mentioned above.  As currently written, I think it might be a problem.