Safe Harbor Plans with Profit Sharing

[dragondon]

If I have a safe harbor plan either with non elective or match and I add in the new comparability profit sharing, do I have to run the ADP/ACP and top heavy tests on the entire plan or just the profit sharing portion? I know that the gateway requirement will need to be met, and that the non elective match can help offset this, but wanted to understand the testing requirements when adding profit sharing to safe harbor plans. 

[Mr Bagwell]

Mr Dragon, 

You are asking questions that take much experience and many books to explain.  With that said, keep asking questions and digging into the website for answers.

I'll drop some hints:  matches don't offset the gateway.  If you design a plan to be Safe Harbor compliant, (many rules come into play) you may or may not be doing ADP/ACP tests.  Again, depends on the design.  If you add a profit sharing to a Safe Harbor plan, Top Heavy will come into play.  If you add a profit sharing with allocation conditions to a 3% Safe Harbor plan, the allocation conditions are worthless because you have to add the conditioned out employees in the gateway test.   Otherwise, you won't pass gateway.

Please don't be offended when I say "find an seasoned pension pro that you work with and pick their brain".  

You are asking good questions, but difficult questions at the same time.

[Lou S.]

35 minutes ago, dragondon said:

If I have a safe harbor plan either with non elective or match and I add in the new comparability profit sharing, do I have to run the ADP/ACP and top heavy tests on the entire plan or just the profit sharing portion? I know that the gateway requirement will need to be met, and that the non elective match can help offset this, but wanted to understand the testing requirements when adding profit sharing to safe harbor plans. 

The Safe Harbor will pass ADP, you don't need to run.

The Safe Harbor may pass ACP without running if you meet the requirements in the code.

Making any additional employer contribution (such as profit sharing) will end the "deemed not top heavy exemption" for the year you make an allocation.

Match can not be used to meet gateway but can be used off set TH minimum contribution if the document allows.

As Bagwell notes these are broad questions that have long answers with sometime the answer being "it depends".

[dragondon]

Can non elective safe harbor be used to offset the gateway requirement? 

[Belgarath]

You asked this same question yesterday. But yes, the 3% nonelective safe harbor contribution can be used toward satisfying gateway. Mind you, it only counts TOWARDS gateway, it doesn't necessarily eliminate it. For example, if gateway for the plan in question is 5%, then you'd still need an additional 2% contribution on top of the 3% safe harbor.