3% SHNEC is chosen in AA but not ACP SH

Can anyone tell me a reason for choosing ADP Safe Harbor only in the Adoption Agreement?  Why wouldn't you always choose ADP and ACP Safe Harbor?

Incompetence.  Total lack of vision.

Good Luck!

Isn't that a bit strong? What if the employer wants to make discretionary matches in excess of 4% of compensation, just as an example? Can't do it if using the ACP safe harbor. What if they want to consider elective deferrals in excess of 6% of comp when determining match?

Seems like you have more flexibility (potentially) if not using the ACP safe harbor?

if it is in regards to the SHNEC can I ask in what situation would it make a difference?

If the only contribution was the 3% safe harbor the ADP is satisfied. if there is no match then there wouldn't be an ACP test to worry about anyway.

There is a match and it fails ACP.

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6 hours ago, Belgarath said:

Isn't that a bit strong? What if the employer wants to make discretionary matches in excess of 4% of compensation, just as an example? Can't do it if using the ACP safe harbor. What if they want to consider elective deferrals in excess of 6% of comp when determining match?

Seems like you have more flexibility (potentially) if not using the ACP safe harbor?

I was under the impression that "NO" match at all was selected or allowed.  Other than that, I agree with you; the most flexible options are best.  

Good Luck!

in the original notice 98-52 for safe harbor ACP test satisfaction  only lists additional matching contributions. 1.401(m)-3(b) indicates a plan satisfies the SHNEC requirement if it satisfies the SHNEC requirement of the ADP test and 401(m)(11) indicates matching is met if it satisfies 401(k)(12) B or C which would include the 3% SHNEC

1.401(m)-2(a)(5)(iv) indicates if you satisfy the ADP safe harbor but fail ACP you are permitted to exclude some of the safe harbor match that satisfied the ADP test.

there is no corresponding reference to what happens if you used the SHNEC to satisfy the ADP safe harbor.

this sounds like you want to use the 3% used to satisfy the ADP test and then combine it with the match in the ACP test - I have never seen an example of this, nor ever discussed. so are you permitted to do this if the plan fails ACP test? I'd have my leanings against this, otherwise you could have a 2% match that goes only to HCEs, but when combined with the 3% would satisfy the ACP test. that would be 'cheating' in my opinion, and I don't think the intent of things. (Therefore when the 3% is used it is only used to satisfy ADP test)

now, since the requirement is "at least 3%" I could see for example, if 4% shnec is made then 3% is used in the ADP test for safe harbor and the additional 1% could be used in the ACP test.

but then I am just rambling on............