Safe harbor nonelective contribution & HCE's

[Guest Melissa Winslow]

I have a safe harbor plan which would like to make a 3% nonelective contribution to satisfy their top-heavy contribution requirement. However, the plan sponsor would like to exclude all HCE's from the contribution. I have read Notice 98-52 but, I am still unsure if HCE's can be excluded from the contribution. Does the contribution have to be made to all eligible employees (HCE's and NHCE's alike)? If not, what kind of documentation is necessary to communicate this to the employees? Citations would be appreciated.

[Guest]

I would agree 98-52 is somewhat unclear on that point. all V B 2 says is safe harbor nonelective contribution is satisfied is employer is required to make a safe harbor nonelective contribution on behalf of each NHCE....

(this of course includes terminees, no hours requirement, etc)

on the other hand, this would be no different than top heavy rules which simply say all non keys must receive, and nothing is said about keys.

Jo Platt / Dave Tenebaum presentation on safe harbor indicated the following examples of valid safe harbor formulas:

an employer makes a nonelective contribution which results in each NHCE receiving 4% of their salary

an employer makes a nonelective contribution which results in all participants receiving 3% of their salary

I would think the main problem could be an HCE who is not KEY.

that person is still entitled to a minimum and could be easily missed.