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Suppose you have a small 401(k) plan that provides for a safe harbor NEC. There are 4 business owners (25% each) and 10 employees (all non-key nhces). The plan only provides the safe harbor NEC to non-keys.

For the past 4 years, 1 owner and 3 of the 10 nhce employees have been excluded. They have a December 31 year end.

The company wants to amend the plan effective November 1 to remove the exclusion for all (i.e. they want everyone to be eligible).

Question: if this is done now, will the 3 nhces that have been excluded be entitled to the safe harbor NECs even though they will have only had 2 months to make salary deferral contributions for this year? Would we be able to include them as benefiting for the salary deferral part of the 410b coverage test?

Thanks.

 

 

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