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Plan effective date 1/1/2020.  Safe Harbor Non-elective component effective 10/1/20.  All employees met eligibility requirements as of 1/1/20.  (No mid-year entrants.)

Plan document says “Compensation shall include only that compensation which is actually paid to the Participant during that part of the Plan Year the Participant is eligible to participate in the Plan.”

Does that mean I use full year comp for Safe Harbor Non-Elective contribution? Or only from 10/1?  

What if plan sponsor wants to allocate a discretionary Non-Elective contribution in addition to the SHNEC?  It would be based on comp for the whole year.   Is it a problem if I use two different definitions of comp…whole year for p/s and part year for safe harbor?

I've got myself confused....since the employees were participants on 1/1, I'm now thinking I should use comp for the whole year for both.  

Comments are appreciated!!

QPA, QKA

Posted

The safe harbor non-elective has to be for a 12 month period to qualify as a safe harbor contribution but you can limit new entrants to comp from date of entry if the document allows. You sated you have no new entrants to the plan after 1/1 so my reading would be 12 months of comp for the safe harbor non-elective.

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