after-tax employee contributions

[Santo Gold]

If an employer wants to allow for after-tax employee contributions, then those contributions are tested in the ACP test.  If the plan operates as a safe harbor match, does that mean that ACP test passes the inclusive of the after-tax employee contributions?

Thanks

[C. B. Zeller]

You can do the ACP test either on just the after-tax employee contributions, or on the after-tax contributions plus the match.

[bmore1147]

 the plan must pass ACP if they are making voluntary after-tax contributions- having a Safe Harbor Match does not automatically satisfy the ACP if you are making After-Tax

[Luke Bailey]

Re C. B. Zeller's point, it's in 1.401(m)-2(a)(5)(iv).

[stxman]

What would this do to top heavy requirements?

As an example, a safe harbor plan with 5 participants composed of 3 owners and 2 employees, all of which are HCEs.  The owners and 1 employee defer to get full company match of 4%, but 1 employee defers nothing, gets no company match.  If the plan was amended to allow after tax 401k contributions and this feature was used, I understand it would still pass ADP/ACP (because there are no NHCEs), but would lose its TH protections.  Would there be a mandatory 3% TH employer contribution to the non-deferring HCE?

[Lou S.]

Yes you lose the "get out of TH free card" so you need to satisfy TH minimum.

[david rigby]

1 hour ago, stxman said:

… 5 participants composed of 3 owners and 2 employees, all of which are HCEs. 

Don't you first have to determine Key vs. Non-Key?

[stxman]

Just now, david rigby said:

Don't you first have to determine Key vs. Non-Key?

Sorry for not making that explicit.  Each owner is 1/3 equity holder, so key.  The 2 employees have zero equity, aren't officers, etc so I am assuming they are both non-key.

That said, if the TH minimum must be met for the 1 non-participating, non-key employee, could a profit share contribution be used to cover that?