Safe Harbor 4% Non-Elective Contribution, Top Heavy Contribution and Secure Act

[Michele F]

The 401K plan was adopted for the plan year starting in 2024. It did not pass the ADP testing.   If they adopt the 4% safe harbor contribution now, do they still need to make a top-heavy contribution to the plan?  Only 2 of 3 owners made salary deferrals, and 1 of 4 rank-in-file employees made a salary deferral.  I cannot find a definitive answer, and was hoping to see what others are doing in this situation.  FYI... I did not set this plan up, and it is a possible takeover plan. 

 

[Lou S.]

If you elect the 4% SF nonelective up to the last day of the following plan year, you are a SF for the year. So if that is the only employer contribution you are deemed not top-heavy.

Though you would need to make it to all eligible (though I believe you can exclude HCEs still), not just the deferring because you can't add a retroactive SF match.

[Michele F]

That was my understanding as well.  Thank you for clarifying.