Additional non-elective contributions in a safe harbor 401(k)

[KateSmithPA]

In a safe harbor plan with a 3% employer contribution as the safe harbor contribution, if the employer wants to add an additional integrated profit sharing contribution does the 3% safe harbor contribution count towards the base contribution? That is, if the employer wants to receive a 5.7% excess contribution, does she have to make an additional 5.7% base contribution to the lower paid employees or will the 3% safe harbor contribution count toward the base?

[R. Butler]

The 3% cannot be used when imputing permitted disparity. (IRS Notice 98-52 Section VIII.B.

[Guest]

no.

I should leave it at that.

you are not allowed to impute disparity on safe harbor contributions.

So I suppose a way to remember things is to say I can't use them in a formula that involves permitted disparity (e.g. integrated plans)

[Richard Anderson]

KateSmithMD,

Here is an idea or two for you. If the employees are not deferring very much, a discretionary match may skew the contribution more towards the owner than will an integrated profit sharing contribution. But, in a safe harbor plan a discretionary match is limited to no more than 4% of compensation.

Also, if the owner is older than the employees, has a cross-tested plan design been discussed? The 3% safe harbor contribution may be used in non-discrimination testing.