Top Heavy Plan + Safe Harbor Match

[metsfan026]

I just want to make sure there's no issue here and I'm not overthinking it.

There's a Plan with only owners + family members participating in the 401(k) portion of the Plan.  They are doing a basic Safe Harbor Match (110% of the 1st 3% plus 50% of the next 2%).  So obviously the Plan is Top Heavy and only the owners + family are getting the Match.

My understanding is that this plan is exempt from Top Heavy Testing, since they are doing the match and are offering the 401(k) Plan to all employees each year (no one else wants it).

Thanks in advance!

[Bri]

sounds right, aside from the usual caveats

(like I pretend you would have deliberately omitted whether there was a profit sharing component to this as well, or if there's no real way to prove the employees actually chose their 0% rates)

[metsfan026]

6 minutes ago, Bri said:

sounds right, aside from the usual caveats

(like I pretend you would have deliberately omitted whether there was a profit sharing component to this as well, or if there's no real way to prove the employees actually chose their 0% rates)

There's no Profit Sharing currently being made.  Everyone is being given the opportunity annually to participate, they are just legitimately choosing not to

[C. B. Zeller]

Is everyone who is eligible to defer (regardless of whether or not they elected to) also eligible to receive the safe harbor match? In other words, is the eligibility the same for deferrals and safe harbor match? Or do they have (for example) immediate eligibility for deferrals, but 1 year of service for match?

If everyone who could defer would be eligible to receive the match if they deferred, then you are good on the top heavy exemption.

However if there is anyone who is eligible to defer but not covered by the match then the plan is not exempt from top heavy, even if no contributions other than deferrals and safe harbor match are actually made.

However however if the only employees who are eligible to defer but not receive a match are long-term part-time employees (who are eligible solely because they met the LTPT eligibility criteria) then the plan retains its safe harbor top heavy exemption.

[Lou S.]

I think I'd strongly recommend that the company get affirmative 0% elections or at least a something signed that eligible employees received the safe harbor notice, SPD and other notices. But yes as others have said if everything is on the up and up and simply no NHCE choose to defer, you get the TH exemption if you meet the rules which it sounds like you do.

[metsfan026]

On 8/26/2024 at 1:51 PM, Lou S. said:

I think I'd strongly recommend that the company get affirmative 0% elections or at least a something signed that eligible employees received the safe harbor notice, SPD and other notices. But yes as others have said if everything is on the up and up and simply no NHCE choose to defer, you get the TH exemption if you meet the rules which it sounds like you do.

We are in the process of getting new elections now.  But yes, everyone has continuously been offered, everyone is eligible for the Match, and have opted not to.

Thanks everyone!