EBECatty Posted December 18, 2020 Posted December 18, 2020 If a 401(k) uses a nonelective safe harbor, and an employee who is employed all year moves from an eligible to ineligible class during the year, is it permissible to say their SHNEC will only be based on their compensation earned while in the eligible category? For example, the participant starts off the year in an eligible class (Division A). They can defer, etc. Then on September 30 they move to an ineligible class (Division B). They are no longer eligible to defer as of moving to Division B on September 30. The plan says the SHNEC will only use their compensation while in an eligible class (Division A). Participant earned $100,000 total, $75,000 through September 30 and $25,000 from October 1 through December 31. Can the SHNEC be based on $75,000?
CuseFan Posted December 18, 2020 Posted December 18, 2020 Yes, provided the document specifies that. Note, however, if plan is top heavy that your TH minimum is based on all compensation regardless. Luke Bailey 1 Kenneth M. Prell, CEBS, ERPA Vice President, BPAS Actuarial & Pension Services kprell@bpas.com
EBECatty Posted December 18, 2020 Author Posted December 18, 2020 Thanks. The document does provide, and top heavy is not an issue. Appreciate it!
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