Safe Harbor Non-elective excludes certain HCEs

[JJRetirement]

I have a safe harbor design question - 

401(k) regulations provide that "the safe harbor nonelective contribution requirement of this paragraph is satisfied if, under the terms of the plan, the employer is required to make a qualified nonelective contribution on behalf of each eligible NHCE equal to at least 3% of the employee's safe harbor compensation."

I know a plan can limit the safe harbor contribution to only NHCEs or it can provide it to everyone.  Is there anything stopping a plan from providing the safe harbor contribution to NHCEs and also to HCE's in a certain identifiable job category (but exclude all other HCE from the contribution)?  

Thanks,

[BG5150]

I believe so.  I've seen plans where spouses and or children of owners were excluded from SH.

[RatherBeGolfing]

1 hour ago, JJRetirement said:

I have a safe harbor design question - 

401(k) regulations provide that "the safe harbor nonelective contribution requirement of this paragraph is satisfied if, under the terms of the plan, the employer is required to make a qualified nonelective contribution on behalf of each eligible NHCE equal to at least 3% of the employee's safe harbor compensation."

I know a plan can limit the safe harbor contribution to only NHCEs or it can provide it to everyone.  Is there anything stopping a plan from providing the safe harbor contribution to NHCEs and also to HCE's in a certain identifiable job category (but exclude all other HCE from the contribution)?  

Thanks,

Yes, it is easily achieved by not using a blanket exclusion of HCEs.  For example, in my document, I would use the "other" category and only exclude part of the HCE group.  So what you want to do is to narrow your exclusion rather than make exceptions to the exclusion, if that makes sense.

[JJRetirement]

Thank you both.  I was pretty sure that as long as all NHCE who were eligible to defer got the SH contrib, then excluding some but not all HCE from the 3% contribution would not affect the SH status of the plan.    Seems there is some agreement on this. 

 

[Mike Preston]

Some? I'd say it is universal.

[BG5150]

On 4/25/2017 at 1:41 PM, JJRetirement said:

Thank you both.  I was pretty sure that as long as all NHCE who were eligible to defer got the SH contrib, then excluding some but not all HCE from the 3% contribution would not affect the SH status of the plan.    Seems there is some agreement on this. 

 

Only if the document provides for the exclusion.  You can't just not contribute a SH to an HCE b/c you feel like it.