Otherwise Excludible and TH

[Earl]

Plan has 21 & 12 for PS & SH Match but 3 months for 401k

If the owner gets Profit Sharing does that eliminate the SH/TH exemption for the OE componant plan?

(So the OE employees will need to get TH min is SH is less than 3% of pay)

Thank you

 

[Mr Bagwell]

Earl,

To answer in order.... Yes, the exemption is gone.

Yes, the employees will need to get TH min if SH match is less than 3% of pay.

Is this a cross tested plan?

 

[ETA Consulting LLC]

4 hours ago, Earl said:

Plan has 21 & 12 for PS & SH Match but 3 months for 401k

If the owner gets Profit Sharing does that eliminate the SH/TH exemption for the OE componant plan?

(So the OE employees will need to get TH min is SH is less than 3% of pay)

Thank you

 

There is no TH exemption to begin with; regardless of any profit sharing contribution.

Good Luck! 

[BG5150]

Quote

There is no TH exemption to begin with; regardless of any profit sharing contribution.

Why is that?

"Exemption" might be the wrong word, but a plan that is solely funded with 401(k) and Safe Harbor under 401(k)(12) or (13), and 401(m)(11) are deemed not to be top heavy.

[Tom Poje]

but in this case deferral is only 3 months and the safe harbor is 1 year, so that is the exception to top heavy free in a safe harbor plan.

[ETA Consulting LLC]

Yes, 'solely funded' isn't the only requirement. All amounts must be under the written safe harbor arrangement.  In this case, you can defer after 3 months; and that provision is not under the safe harbor arrangement; even though you're exempt from ADP testing.  This would apply even if there aren't any early entrants to defer after 3 months. 

Good Luck!

[401_noob]

Slide 76 on page 38 of the ASPPA Top Heavy presentation confirms Tom and ETA's statement.

https://www.asppa.org/Portals/2/06-11-14 Presentation.pdf  

[BG5150]

3 hours ago, Tom Poje said:

but in this case deferral is only 3 months and the safe harbor is 1 year, so that is the exception to top heavy free in a safe harbor plan.

missed that piece...

[Tom Poje]

now you are beginning to get bad like I do and sometimes missing stuff when reading the question!

trying to get to that magic 3000 posts? I think Dave gives out 3000 hit club T-shirts for that, but only if you are on his 'good' list.

[BG5150]

I probably have 2,500 good posts.  The others would be silly ones, or dumb ones like my first one in this thread.

[Earl]

 

Dammit!  I wrote it wrong. 

I apologize and hope someone has time to respond to the correction:

Plan has 21 & 12 for PS but 3 months for 401k & SH Match

If the owner gets Profit Sharing does that eliminate the SH/TH exemption for the OE component plan?  

(So the OE employees will need to get TH min if SH is less than 3% of pay)

Thank you

[Mr Bagwell]

Earl,

You are still in the same boat as original post.

In a Top Heavy safe harbor plan, the Top Heavy rules kick in when a profit sharing contribution is to be done.

No exemption if plan wants a PS contribution.

[Earl]

ok, so the two component plans are aggregated for TH.  

Thanks

[BG5150]

Is the owner the only non-excludable participant?  All the others have less than a YOS or are under 21?

 

[shERPA]

No OE exclusion for TH purposes.  Dual eligibility is a trap for TH 401(k) plans.  Just say no.