Coverage and Safe Harbor Match

[DocumentDiva]

I have two 401(k) Plans that are a controlled group, and they fail both 410(b) and average benefits tested separately.  I'm testing them together, but the issue is one plan has a basic SHM and the other plan has an enhanced safe harbor match of 100% up to 4%.  I believe that both plans should have the same match formula but I'm having difficulty putting my eyes on any articles or regs saying this to confirm what I believe.  I read something recently where it mentions if there's a 3% safe harbor non-elective then both plans should have the same formula and the plan without the 3% would have to give the 3% to the eligible participants. Has anyone else ran into this issue with safe harbor match plans that are required to be aggregated for testing?  Thank you so much!

[Lou S.]

If you have to aggregate a SH and non-SH plan for testing, then you lose the SH exemption in the SH plan for the year you aggregate them, at least that's my understanding.

As to the different match formula you'll need to test under BRF and make corrections if you you are failing.

I have not had to do this in practice, only theory.

[Paul I]

See Notice 98-92 Example 5 (copy attached).

The first plan uses the formula of 100% on the 1st 3% deferred and 50% on the next 2%.  The second plan uses the formula of 100% on the 1st 4%.  An HCE in the second plan deferring 4% will have a higher match rate than an NHCE in the first plan deferring at the same 4% rate.  This is not allowed.

not98-52.pdf

[DocumentDiva]

37 minutes ago, Paul I said:

See Notice 98-92 Example 5 (copy attached).

The first plan uses the formula of 100% on the 1st 3% deferred and 50% on the next 2%.  The second plan uses the formula of 100% on the 1st 4%.  An HCE in the second plan deferring 4% will have a higher match rate than an NHCE in the first plan deferring at the same 4% rate.  This is not allowed.

not98-52.pdf 55.74 kB · 0 downloads

Many many thanks!  This is exactly what I was looking for