Coleboy1 Posted July 12, 2022 Posted July 12, 2022 I am working on a small 401(k) plan. This plan has a 3% SHNEC. The PS allocation is Integrated. In reviewing the contributions, I see that 3% SHNEC was made for everyone but I'm also seeing a non-elective contribution made only to the HCE Owner. I am not sure why she would get a non-elective and no one else. What am I missing or not seeing?
Lou S. Posted July 12, 2022 Posted July 12, 2022 Sounds like a problem. If everyone is in their own rate group and you were cross testing and it passed gateway and 401(a)(4) that could make sense. But doesn't make any sense in an integrated allocation where you can't even use the 3% SHNEC as part of the PS base, I'm not sure how you passed testing with only the HCE owner benefiting. Luke Bailey and CuseFan 2
Bri Posted July 12, 2022 Posted July 12, 2022 How much more did she get as the PS portion? I could see everyone getting their 3% as SH, but the owner getting 3% SH and then up to an additional 3% of excess comp as profit sharing. I believe some plans will say the SH offsets the "step 1" of a four-tier integrated allocation. EDIT: Holy schnikes did I misthink this one out..... Luke Bailey and Bill Presson 2
Coleboy1 Posted July 12, 2022 Author Posted July 12, 2022 She received her 3% SHNEC plus an additional 1.5% non- elective
Popular Post Bill Presson Posted July 12, 2022 Popular Post Posted July 12, 2022 Pretty sure SHNEC money can't be used to offset integrated contributions. Unless everyone is in their own group (which is at least implied as not the case), then this allocation isn't being done correctly. 401kology, CuseFan, Barry Levy and 2 others 5 William C. Presson, ERPA, QPA, QKA bill.presson@gmail.com C 205.994.4070
Bri Posted July 12, 2022 Posted July 12, 2022 That does make more sense. I just looked at a plan document, the SH is supposed to offset step 4 rather than step 1 of a four-tier integrated allocation. I agree, no running the "integrated" piece on top of the 3% safe harbor. Bill Presson and CuseFan 2
Coleboy1 Posted July 13, 2022 Author Posted July 13, 2022 Just so I get this right. The 3% SHNEC cannot be used as the base for the PS allocation?
Popular Post 401kology Posted July 13, 2022 Popular Post Posted July 13, 2022 @Coleboy1- you can use the SHNEC in a plan that utilizes new comp (cross-tested) as an allocation formula. You cannot use it in an integrated allocation formula but it can be used to offset the top heavy required contributions for anyone who was not eligible for the integrated PS allocation due to hours requirement Bill Presson, Tom, jsample and 2 others 5
Nate S Posted July 13, 2022 Posted July 13, 2022 learn something new everyday, I always run integration with SHMA, but never knew why! Otherwise, confirm the 1.5% was correctly sourced as non-elective, maybe she intended it as ROTH, or after-tax if there was room in the ADP to shift
Coleboy1 Posted July 13, 2022 Author Posted July 13, 2022 Yes, definitely was a non-elective. She maxed out at the $26K.
Coleboy1 Posted July 13, 2022 Author Posted July 13, 2022 Is there something in writing that I can give as back up to my boss and the owner stating this about the 3% SHNEC? Reasons behind it,etc.
Bird Posted July 14, 2022 Posted July 14, 2022 4 hours ago, Coleboy1 said: Is there something in writing that I can give as back up to my boss and the owner stating this about the 3% SHNEC? Reasons behind it,etc. I'd cite the plan doc allocation provisions. David Schultz 1 Ed Snyder
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