Safe Harbor Document Drafting Question

[Phlyers]

Only contributions are Employee Deferrals and Employer Safe Harbor Match, our documents ask which test the safe harbor is intended to satisfy, just ADP or both ADP/ACP.

Our old documents from McKay Hockman noted that the ACP was automatically satisfied if the only employer contribution was a safe harbor match.  Was I correct in drafting the safe harbor match with only the ADP safe harbor selected to be satisfied and assuming that ADP/ACP election was only for a safe harbor match with additional discretionary/fixed match or after-tax contributions.  Wanted to know for our new docs.

[John Feldt ERPA CPC QPA]

Check with your document provider. But if you mark that only the ADP test safe harbor is satisfied, then it's certainly possible the document could require the ACP test for the match.

For example, you can provide a ADP safe harbor with a safe harbor match formula of 100% of the first 3% of pay deferred plus 50% of the next 5% of pay deferred. That satisfies the ADP safe harbor. It does not, however, satisfy the ACP safe harbor so you would not mark the document that it satisfies both.

[RatherBeGolfing]

I agree, check with your document provider. That said, I think ADP only is correct.  

[Kevin C]

If you intend for the SH match to satisfy both the ADP and ACP safe harbors, I would complete the document to reflect that both were intended to be satisfied.  Your document provider should be able to help you with that.  As John noted, it is possible to have a safe harbor match formula that meets the ADP safe harbor requirements, but not the ACP safe harbor requirements. I wouldn't want the document to say we did not intend to satisfy the ACP SH if we do.