Safe Harbor Cross-tested Plan

[SDS]

I have a 401(k) safe harbor (3%NE) cross-tested plan with immediate entry dates on DOH for all contribution types. The only service requirement is age 21. There is no EOY requirement or service requirement for the PS contribution and each person is in their own classification group. This plan is Top-Heavy. If you have a new hire (NHCE) during the plan year, can you exclude them based on the otherwise excludable employee rule - meaning the NHCE would not need to receive the minimum gateway contribution with less than a year of service?

 

[Tom Poje]

if you test the otherwise excludables separately, and there are no HCEs in that group, that test would pass without needing to cross test, so no gateway should be needed

[ETA Consulting LLC]

1 hour ago, Tom Poje said:

if you test the otherwise excludables separately, and there are no HCEs in that group, that test would pass without needing to cross test, so no gateway should be needed

You forgot that the plan is top heavy   

Once you're require to make the Top Heavy minimum, then you would invoke the gateway as well.

Good Luck!

[Tom Poje]

I should have said "usually no gateway for the otherwise excludable group"

you have split the plan into 'two' plans

the otherwise excludable 'plan' can be tested on an allocation basis, and therefore no gateway is required.

years ago on the Links (no not the British Open) someone posted the following (well ok. maybe if your document is worded differently....)

It depends on what the plan document (gateway amendment) says. I know the Corbel amendment our office uses allows us not to give the gateway minimum to the statutory excludable employees. I have seen other document providers treat the issue differently.