Top Heavy; Safe Harbor excludes HCEs

[Tom]

Medical office has safe harbor match plan (no profit sharing funding).  Plan excludes HCEs from the Safe harbor match as there are a number of high-paid para-professionals.  Plan is not top heavy at this point.  But when it does become top heavy, certainly the non-key HCEs will need to receive 3% (since the key owners are deferring the max.)  And I assume ONLY the non-key HCEs who are excluded from the safe harbor match need to get the top heavy contribution (whether they deferred or not).  The top heavy would certainly not have to go to all non-key.

Comments?

Thanks

 

[Belgarath]

IF the only contributions to the plan are deferrals and safe harbor match, then the plan is deemed not to be top heavy, so no TH contributions whatsoever.

If other contributions are made, then you lose the TH exemption, and if plan top heavy, depends upon your document. While most exclude Keys from receiving TH, some provide for TH for everyone. So if TH becomes applicable, check your document (or check it now, and amend if necessary to prevent TH to Keys, if that is what you want to do).

[Tom Poje]

this rule is found in 416(g)(4)(H)

as I recall, the one exception is if otherwise excludable employees were eligible to defer but were excluded from the safe harbor.

[Bri]

I would suggest amending the plan in the future (before the first plan year you know will be TH, if possible) to provide the safe harbor match to non-key HCEs in addition to NHCEs.  I've seen that in some adoption agreements, at least.

[justanotheradmin]

I would read the basic plan document as well as 416(g)(4)(H) as Tom suggested. 

HCE do not have to share in the SH Match for the the Top Heavy minimum waiver to be intact. But make sure your document mirrors the code, it may not. The document may provide for a more generous TH min.

If you want to amend as Bri suggested, to include the HCE - non-Key employees, you can, but neither 416 nor 401(k) or 401(m) require it. But your document might in order to avoid an additional TH min. 

The basic plan document we use mirrors the exemption in 416 and also provides that forfeitures that are allocated as discretionary match, as long as they are within the ACP additional match rules, those forfs don't even trigger a TH min. but the moment a dollar in ER contribution comes in from outside the plan (as match, PS, whatever) the TH min applies.