Cross Test with SHNEC - Max Profit Sharing to HCE and 0 to NHCE

[MP CPC]

Here's a 401k- safe harbor- profit sharing plan where every eligible participant can defer and also receives 3% safe harbor non-elective contribution.  The doctor wants to give himself and spouse up to 6% profit sharing non-elective contribution and 0% to staff.  This formula passes 410(b) Ratio Percentage Test, Rate Group Testing and General Test Average Benefits Test by aggregating non-elective and SHNEC.  And Gateway is met with 3% to NHCE and 9% to HCE - 1/3 test.  Seems discriminatory, testing says otherwise.  Anyone have experience with this?  Thanks!

[C. B. Zeller]

This is a common way to structure contributions when you have an older HCE and some younger NHCEs. It is not discriminatory, as long as the numerical tests under 401(a)(4) are satisfied (and you said that they are). SHNEC is considered a profit sharing contribution for purposes of 410(b) and 401(a)(4).

[Bri]

It's not uncommon for a TPA to give a sponsor options - plain 3% SH, a "3 + 9" where it's exactly as you describe, and then a "5 + max" for small, medium, and large contributions.

[CuseFan]

All the time