Safe harbor- No NHCE participation

[ton cano]

i have been trying to find this answer, would seem like others have had this situation but I can't find a thing. if you have a 401k plan with safe harbor and no employees want to participate do you have to pay the 3% or can you say you are doing the 4% and since no one is deferring, there is nothing to contribute ???

and if you had just one NHCE, you could do 4% for them and you would satisfy the requirements?

I hope this makes sense

thank you so much!! 

[Lou S.]

Not sure I understand your question. Your plan document and required annual safe harbor notice should have the answer to your question of whether you are doing the Non-elective safe harbor that needs to be at least 3% to eligible participants whether they are contributing or not or is you are doing a safe harbor match (regular or enhanced which is your 4% minimum) to those who are contributing.

[Tom Poje]

I'll go out on a limb and assume when you say no employees want to participate you mean the HCEs are deferring and no one else. otherwise, why have the 401k.

As Lou indicated, if your document says the safe harbor is 3% then anyone eligible to defer MUST receive the 3%.

If there are HCEs deferring then it would be best to amend to a safe harbor match, but then make sure all NHCEs sign a deferral election of 0% to protect yourself and no one comes back and says "If I knew there was a match I would have deferred"

If the plan is cross tested then the 3% safe harbor is common because it covers top heavy as well.

[Mike Preston]

4 hours ago, Tom Poje said:

I'll go out on a limb and assume when you say no employees want to participate you mean the HCEs are deferring and no one else. otherwise, why have the 401k.

As Lou indicated, if your document says the safe harbor is 3% then anyone eligible to defer MUST receive the 3%.

If there are HCEs deferring then it would be best to amend to a safe harbor match, but then make sure all NHCEs sign a deferral election of 0% to protect yourself and no one comes back and says "If I knew there was a match I would have deferred"

If the plan is cross tested then the 3% safe harbor is common because it covers top heavy as well.

Counts towards the gateway, too.

[david rigby]

I might go out on a limb and ask if there is some "deficiency" in the communication of the plan.  Not accusing, just askin'.