Safe Harbor 3% NonElective to NHCE only. Mid Year Change wanted.

[Mr Bagwell]

Plan is designed as safe harbor 3% non-elective to NHCEs only.  Appears that employer would like to add the HCEs now with a Mid-Year change.

I'm pretty confident this is doable.

But, because of the timing of the change, I think this requires a 4% safe harbor non-elective to both the NHCE and HCE?

Am I correct?

Thanks

[Bird]

Well, it's not prohibited by Notice 2016-16; nobody is having anything taken away, and I don't see anything that says you'd have to increase the SH to 4%.  I'd tentatively say it's ok.

[Mr Bagwell]

Thanks for the thoughts Bird.

Notice 2020-86 is the piece that talks about having to go 4% if done after the beginning of the year.

So if the plan had no safe harbor design at 1/1/2021 and wanted to be safe harbor non-elective for 2021 at 5/1/2021.   No problem, amend the plan, give the 4%, done.

But I have a 3% NHCE only safe harbor plan at 1/1/2021 and wasn't sure the right answer.  Maybe the answer is in the question of "what is a safe harbor contribution"?  A Safe harbor contribution is a nonelective contribution of at least 3% of compensation to all NHCEs eligible to defer.   So giving the HCEs a 3% contribution that is a 100% vested is fine,  No testing needed because everyone got the 3%?

???

[C. B. Zeller]

17 minutes ago, Mr Bagwell said:

But I have a 3% NHCE only safe harbor plan at 1/1/2021 and wasn't sure the right answer.  Maybe the answer is in the question of "what is a safe harbor contribution"?  A Safe harbor contribution is a nonelective contribution of at least 3% of compensation to all NHCEs eligible to defer.   So giving the HCEs a 3% contribution that is a 100% vested is fine,  No testing needed because everyone got the 3%?

This is correct. You do not need to make any changes to the safe harbor. Just give a 3% PS contribution to the HCEs. Assuming, of course, that the plan's PS formula allows you to do so.

[Mr Bagwell]

CB, 

The plan does allow the profit sharing.

Thanks