SH NEC contributions to PS plan

Client has both a 401(k) and a PS plan.  401(k) previously had SH match to NHCEs only.  We are amending to no SH, with provision that SH NEC will be paid to another plan - the sponsor's PS plan.

Q:  Does the PS adoption agreement have to state somewhere that it will receive SH NEC contributions to cover the 401(k), or is it all okay just as long as all 401(k) eligible participants receive at least 3% in the PS?

(we can't seem to find any provision in the PS adoption agreement)

If you have a PS only AA then it won't have SH language because you don't have 401(k) provisions. I would say that the document of the plan accepting the SHNEC must have that specific language because of the various requirements and restrictions (vesting, distribution, etc.). Why are these two separate plans anyway?

PS plan is written on PS 401(k) document

PS plan is written on PS 401(k) document.

So, the operations side of this is clear - no more SH match, and first 3% of PS is SH NEC for the other plan.  That means the 1st 3% will be fully vested, and anything above that is subject to graded vesting.

• Does the PS plan have to be amended to allow for SH NEC contributions?
• If not amended, doesn't the PS doc have to somehow reflect that some of the contributions are fully vested?

Yes, the SHNEC can be made to another plan.  Yes the recipient plan document has to provide for this. For vesting as well as SH withdrawal restrictions.  You may have trouble finding a pre-approved plan that includes appropriate provisions.  You could probably make it "good enough" by using a 401(k) document, not allowing deferrals, but providing for SH.  But the software may not allow this combination.

Hate to be the record-keeper for that one.