Testing with Safe Harbor Plans that contain Profit Sharing

For a Safe Harbor Plan that contains a Pro Rata Profit sharing element does the ADP ACP and Top Heavy testing only relate to the Pro Rata profit sharing piece or does the entire plan now need to be tested for the ADP ACP and Top Heavy even though some of the contributions were made under safe harbor? 

I have the same question for a New Comparability Plan. Does the entire plan now need to be tested for the ADP APC Top heavy and cross tested even though some of the contributions were made under safe harbor? 

No, there are separate 401(a)(4) tests for nonelective contributions such as profit sharing.  Your text suggests you want to throw safe harbor and profit sharing contributions into your ADP/ACP tests.

If it's safe harbor, why are you even doing ADP/ACP?

So then for profit sharing contributions what tests need to be run then? From here it looks like we are fine with the ADP and ACP tests because of the safe harbor but then what happens when we add a profit sharing contribution, what test need to be run for that? 

Mr. Dragon, 

You need to visit with your mentor/supervisor/trainer.  You need some pension 101 gaps filled in.

If a plan is truly abiding by the safe harbor rules, there will not be an ADP/ACP test.  (I am assuming no dual eligibility)

If you add a ProRata profit sharing into the equation, you will still not do an ADP/ACP test. (still assuming no dual eligibility)  You just need to pass 401(a) coverage testing.

New comparability/Cross Testing is a completely different animal when it comes to what tests need to be run.  Volumes are written about cross testing..... there is really no short cut to knowledge about these plans.

Good luck.

Depending upon your plan design, you might well satisfy ADP via the safe harbor, yet STILL need ACP testing if there are matching contributions that don't satisfy the ACP safe harbor.

The testing for the Profit Sharing, again, will depend upon your profit sharing formula, and whether you utilize a "design based safe harbor" under the 401(a)(4) regulations, or whether you are general testing, etc.

Also, there's no automatic top heavy exemption, even in a 401(k) safe harbor, if you are making profit sharing contributions or reallocating forfeitures. So be careful on this. Your 401(k) safe harbor contributions can be used toward top-heavy, but may not be sufficient if you are allocating safe harbor based on compensation from date of participation.

There are enough possible "hooks" or complications, depending upon the specific plan design and employee census, so that using general answers from this board is risky business. If I were you, I'd discuss with co-workers/supervisors/etc. to get some clear direction/instruction, and consider sources such as the Erisa Outline Book, for example to give you a better understanding of these issues. 

I see Mr. Bagwell and I were typing responses at the same time!

15 minutes ago, Belgarath said:

I see Mr. Bagwell and I were typing responses at the same time!

Yup!

Good answer Belgarath!  You added some terminology that I wanted to use, but could not find a simply way to say it.