Excluding some NHCE from Safe Harbor Match

I have a client that has two people (NHCE) that they would like to exclude from the Basic Safe Harbor Match; they would still be able to defer.

Coverage is not an issue. 

But, I still don't feel I can do this.  But why not?

Under the safe harbor rules, everyone who is eligible to defer is required to get the safe harbor contribution.  If they do not, you don't have a safe harbor plan.  You can disaggregate the otherwise excludible employees, and apply the safe harbor to one disaggregated plan and the ADP to the other disaggregated plan, but that seems to be not what is happening here.   

though it is obvious what he meant to say, ERISAAPPLE missed one word

every eligible NHCE (because of course, you can exclude HCEs)

1.401(k)-3(b)

They can put those two NHCEs in a separate plan altogether.  It would be a lot of work for the sole purpose of excluding two NHCEs from safe harbor while allowing them to defer.  You'd still have to account for a host of other overlapping compliance issues.

Good Luck!

Just a hunch: the desired exclusion is merely a manifestation of something else going on.  A good consultant would probe further, to (help) determine if there is another way to meet the underlying need.

2 hours ago, Tom Poje said:

though it is obvious what he meant to say, ERISAAPPLE missed one word

 

every eligible NHCE (because of course, you can exclude HCEs)

1.401(k)-3(b)

Yep.