Strange one here:  SAFE HARBOR Match Plan

Plan excludes a number of items from their definition of compensation for deferral purposes (including several types of special bonuses).  For the SH match, they exclude the same things as deferral, but have an additional "bonus" exclusion.    414s testing would be required for both the deferral and the SH match definitions of compensation.  My understanding is that the  plan must pass 414s testing.   The plan does not pass 414s for deferral, but does for the  SH match.   In a Non-SH plan, I would run the ADP testing on total compensation and be done.   What are my options for a SH plan?  If the SH match compensation failed, I would amend the plan and recalculate the match. 

Thoughts?

20 hours ago, justatester said:

In a Non-SH plan, I would run the ADP testing on total compensation and be done.   What are my options for a SH plan?

If you fail 414 are you a SH plan? You don't satisfy all the requirements for such, correct? So I think you ADP test on a 414 safe harbor definition of compensation. Big picture question - why the different definitions? Is there a salary deferral withholding challenge for one or more of the exclusions? Unless a compensation component is non-cash (except maybe tips) what is the aversion to taking a deferral?

I agree with Cuse Fan here as well.  Why would you not have a safe harbor definition of compensation for the SH Match? Agree - why would the definitions be different for deferrals and SH Match?

Well...plan sponsors like to do strange things.  The bonusses excluded from deferrals are sign on bonusses and a couple of different other types.  The additional extra bonus excluded from SH match appears to be targeted to mostly the HCEs.  My guess is for cost savings on the match

My SH match compensation passes 414s.  After doing some additional research/digging, I don't believe the deferral definition needs to pass 414s.  So overall I think I am ok.

26 CFR § 1.401(k)-3 - Safe harbor requirements.

(iv) Restrictions on types of compensation that may be deferred. A plan may limit the types of compensation that may be deferred by an eligible employee under a plan, provided that each eligible NHCE is permitted to make elective contributions under a definition of compensation that would be a reasonable definition of compensation within the meaning of § 1.414(s)-1(d)(2). Thus, the definition of compensation from which elective contributions may be made is not required to satisfy the nondiscrimination requirement of § 1.414(s)-1(d)(3).

23 hours ago, CuseFan said:

If you fail 414 are you a SH plan? You don't satisfy all the requirements for such, correct? So I think you ADP test on a 414 safe harbor definition of compensation. 

Yes and no.  Agree that if the 414(s) arithmetic test fails because a pre-approved 414(s) definition of compensation is not used, then it is not a safe harbor plan.  The consequence is potential disqualification for failure to follow the plan document (which states that it is a safe harbor plan), not to perform an ADP test.