SHNEC Contribution and ACP testing

If a plan makes a 3% SHNEC contribution, but also make a match of 50% up to 5% is ACP testing required?  Does the SHNEC cover both ADP/ACP?

It sounds like the match fits the exception §401(m)(11) and does not require ACP testing but you can double check to make sure you meet all the requirements.

The match formula cannot be based on more than 6% of deferred compensation. The match cannot exceed 4% of deferred compensation in total. So, a discretionary 50% match on the first 6% of deferred compensation (3% total) would be exempt from the ACP test, while 25% match on the first 10% of deferred compensation (2.5% total) would not.

20 minutes ago, rikkiphillipson said:

The match formula cannot be based on more than 6% of deferred compensation. The match cannot exceed 4% of deferred compensation in total. So, a discretionary 50% match on the first 6% of deferred compensation (3% total) would be exempt from the ACP test, while 25% match on the first 10% of deferred compensation (2.5% total) would not.

I think that is the rule for a discretionary match.

For a fixed match you can go over 4% but can't match on deferrals over 6% of pay.

There are a few other conditions in the code but those seem to be the big ones.

Double check the safe harbor notice rules.  You don't need a safe harbor notice if the plan uses the SHNEC as as ADP test safe harbor.  If the plan uses the SHNEC for both as as ADP test safe harbor and as an ACP safe harbor, then you need to provide a safe harbor notice.  See 1.401(m)(3)(a).  This is an easily overlooked requirement.

The match formula can be fixed or discretionary as long as the formula used to calculate the match does not exceed 4% of safe harbor compensation and based on deferrals not greater than 6% of safe harbor compensation.  See 1.401(m)(3)(d)(3).

16 hours ago, Paul I said:

The match formula can be fixed or discretionary as long as the formula used to calculate the match does not exceed 4% of safe harbor compensation and based on deferrals not greater than 6% of safe harbor compensation.  See 1.401(m)(3)(d)(3).

That's mostly right.  Except as Lou said, the fixed match has no cap on the amount, but still cannot match on deferrals over 6% of pay.  That piece is a cornerstone of the triple stacked match.

On 2/7/2023 at 11:09 AM, justatester said:

If a plan makes a 3% SHNEC contribution, but also make a match of 50% up to 5% is ACP testing required?  Does the SHNEC cover both ADP/ACP?

Does the document say that it does?