safe harbor 401(k)

[k man]

I have a client who has a safe harbor 401(k) plan giving the 3% non-elective contribution to all eligible participants. currently, employees must wait 12 months to enter the plan. they would like to allow employees in immediately for deferrals but restrict the 3% non elective to those with 1 year of service.

can they have this dual eligibility with a safe harbor 401(k) plan?

[Guest GregSelf]

Everything I can find in 401(k)(12) talks about employees eligible to participate in the CODA. The 401(k) Answer Book also confirms this. (that no minimum hours requirement or last-day rule can be imposed when allocating the 3% nonelective under a safe-harbor 401(k) plan)

[M R Bernardin]

I believe it was the first notice that came out on safe harbor plans (98-52?) that clearly permits you to do this. The relevant language is towards the back of the notice. The plan is treated as two plans, one for those who have satisfied the year of service requirement, and one for those who have not. You can restrict the safe harbor contribution to the group that has satisfied the service requirement, and run the ADP test for the other group.

[Guest GregSelf]

M R Bernardin:

Just read 98-52. Thanks for your post. It does specifically address this issue. k man: keep in mind you'll have to test the disaggregated group.

[Guest RJM]

Careful. If the initial reason for using the 3% contribution (instead of the SH match)was to satisfy top heavy minimum, you will miss covering the early entry folks and have another issue to address.