Allowing an NHCE to join the plan early - for deferrals only?

Fairly typical situation: someone at the plan sponsor misinterprets the eligibility rules, and New EE is allowed to defer long before the eligibility provisions allow.  The plan sponsor is OK with correcting this via a retroactive amendment (it's just one person and this is the first time it's happened for this plan).

The plan is a 3% SH that we calculate (and they deposit) after the end of the year, and the plan is also top heavy.

1. If the amendment is limited to allow the affected participant to defer only and doesn't 'bring him in' for any other contribution (including the safe harbor), is the plan still a valid safe harbor plan?

2. If yes to #1, then might we also lose the top heavy exemption?

I've got a sense that an EPCRS SCP correction shouldn't cause a failure in the plan, but that seems like it shouldn't apply here because we're still doing administration for the year in question.  Obviously, the simple answer here is to make the amendment say that he's eligible for the safe harbor as well (especially since he's going to get 3% as top heavy minimum), and that's usually what we do, but I'm just making sure of their options.  Thanks.

If it's an NHCE bringing him by corrective amendment is fine.

You should be fine if you test on an otherwise excludable basis for safe harbor.

However, I think you will blow the TH exemption if he's not getting the safe harbor. Though Secure 2.0 might change that but I don't think it changes it until 2024.  At least that was my understanding last time I looked at the issue but it's been a while.

Assuming the eligibility provisions for the 401(k) are the same as the Safe Harbor, the early inclusion amendment for 401(k)-only should not be problematic from a Safe Harbor standpoint.  The individual isn't eligible for the Safe Harbor contribution, so this doesn't affect the Safe Harbor status of the plan.

The next quandary is whether a plan correction offered through EPCRS opens a can of worms for another qualification issue:  Top Heavy

There is nothing in EPCRS or in the ERISA Outline book that addresses this situation specifically.  However, the Correction Principles in EPCRS state that "If an additional failure is nevertheless created as a result of the use of a correction method in this revenue procedure, then that failure also must be corrected in conjunction with the use of that correction method and in accordance with the requirements of this revenue procedure."  

The Top Heavy Minimum does not have to be met with a Safe Harbor contribution though.  You could provide a Profit Sharing contribution subject to vesting that is 3%, or less if the highest allocation to a Key is less.

Path of least resistance I suppose is to give him early inclusion in the Safe Harbor, but it's certainly not the only solution for meeting Top Heavy.

Lou S. is correct:  Effective for plan years beginning after December 31, 2023, otherwise excludable employees will get parked into a separate Top Heavy Test, and chances are that group will not be Top Heavy, so in most cases there will be no Top Heavy Minimum for Otherwise Excludables.