3% safe harbor with additional match

[R. Butler]

We have a safe habor plan using the 3% nonelective contribution. The plan also has a subject to vesting match of 20% all the way up to 100% of employee deferrals. I am fairly ceratin that this plan meets the ADP safe harbor, but fails the ACP safe harbor because matching contributions can occur on deferrals in excess of 6% of comp.

I have been advised that this plan meets both the ADP and ACP safe harbors. The person advising claims the match cap only applies when using the match to satisfy safe harbor.

Am I correct? If I am correct to I test on the entire match or just the portion on deferrals in excess of 6%.

[rcline46]

This is not a Safe Harbor match, therefore the entire match amount must pass the ACP testing.

Have your 'friend' quote what part of 98-52 makes it safe harbor. Then check the reference.

[R. Butler]

Thank you. I was pretty sure that was correct, but just needed some verification.

[MWeddell]

I agree that it does not meet the ACP safe harbor.

Even if the match were limited to the first 6% of pay deferred, it still would not meet the ACP test safe harbor. Some HCEs would receive a higher match rate than some NHCEs, which violates the conditions of Section VI(B)(3) of Notice 98-52, the relevant portions of which were not modified by Notice 2000-3.

[Guest Giovanni]

I know this is an old post, but I just read it and am not sure why MWeddell says that it wouldn't be a ACP Safe Harbor plan even if the match is only on the first 6% of comp. Why are you saying that some HCE's would receive a higher match rate than some NHCE's?

[R. Butler]

I am not sure I agree with MWeddell's last point. The relevant provision is cited, but I look at Example 2 and arrive at a different conclusion. If the match is limited to the first 6% of deferrals, the Plan should still meet safe harbor.

[Guest Giovanni]

Thank you, I also looked at Example 2 and come to the same conclusion as you do. Maybe MWeddell has changed his position since last year. If he hasn't, maybe he could further explain his position.