Employer is refusing to make the 3% NESH

Hi

If the employer is refusing to make the 3% non-elective safe harbor, what is the penalty or other issues?

Tx

Potential plan disqualification.

Potential DOL audit?

I think they want to get disqualified, thankfully not my client, asking for someone else.

Thank you all for your input.

Peter, availability is there from all professionals, just that the client does not want to do it, I am told. No one can force the client until IRS and DoL steps in and things get out of hand.

I have never seen anything like this in all my years.

Someone probably asked, but assuming this is the previous plan year contribution and not a current plan year contribution - i.e., making it (or not) as they go.  

Yes, for 2023 and they also refuse for 2024.

In addition to agreeing with others' comments, if the plan's safe harbor notice contained the language allowing suspension or reduction of safe harbor contributions mid-year with proper prior notice, I would suggest they at least amend the plan to suspend contributions prospectively (with at least 30 days' notice to participants and an effective date of the amendment that coincides with the expiration of the 30 days) to stop the bleeding in 2024, so to speak. They'd still be on the hook for the 2023 contribution and the 2024 contribution through the suspension date, but not for the rest of 2024 and not on an ongoing basis. And it sounds like they shouldn't have a safe harbor plan in the future anyway as they obviously don't understand it and aren't willing to comply with the requirements.

On the downside, I suppose giving participants a notice highlights the fact that they were supposed to get a contribution.

Side note - I assume that not making the contribution subjects them to ADP/ACP testing. Do they pass testing? If not, does the cost of fixing the ADP test mitigate the cost of SH contributions? I don't do testing, so thinking out loud about another possible approach.

I agree with EBP's comments (and others).  That's why I was asking the year the contributions were missed.  At least they can stop the bleeding, but still on the hook for 2023 and partial 2024.  They should have set-up a maybe safe harbor.  The side note from EBP is key re: ADP/ACP testing....and speaking of keys - top-heavy as well?