Dual Eligibility Testing

I'm not perfectly clear on how you would test this design, and would appreciate any insight. 

A 401(k) plan allows immediate eligibility for deferrals on date of hire; the only condition is age 21.

The plan also provides a safe harbor nonelective (also age 21). Eligibility for this portion is the January 1 or July 1 after working 1000 hours (not January 1 or July 1 following a full 12-month period in which the employee completed 1000 hours). So, if a full-time employee was hired on July 1, 2021, they may work 1000 hours before the end of 2021 and enter the safe harbor portion on January 1, 2022. 

This does not seem (to me at least) to impose the maximum permissible minimum age and service conditions in 410(a), so it's not clear that dividing line for ADP/safe harbor would necessarily correspond to the participants actually getting those contributions when using the otherwise excludable employee rule (i.e., some participants who have not satisfied the maximum permissible age and service requirements would be getting safe harbor nonelectives). 

If that's the case, how would you test? Would it be everyone with less than the maximum permissible conditions subject to ADP (even if some are getting safe harbor nonelectives) and everyone with more than the maximum permissible conditions exempt from ADP testing due to the safe harbor? FWIW, this is what ERISApedia and Who's the Employer seem to suggest.

Splitting the eligibility requirements between 401(k) and safe harbor generally does not affect your ADP/ACP test, but it can affect the impact of the top heavy requirements. 

Thanks. Top heavy is not a concern with this plan, but I am interested to know how folks would divide the testing groups under the circumstances.

1 hour ago, EBECatty said:

Thanks. Top heavy is not a concern with this plan, but I am interested to know how folks would divide the testing groups under the circumstances.

I don't have any plans with dual eligibility so maybe someone else will chime in! 

I agree with ERISApedia and Who's the Employer. Your group of employees who satisfied the maximum age and service conditions of 410(a) will satisfy ADP by way of the safe harbor contribution. Your non-410(a) group will be subject to the ADP test; even though some employees in that group are receiving safe harbor contributions, it does not satisfy the ADP safe harbor because not all employees in that group who are eligible to defer are getting them. Hopefully all of your otherwise excludables are NHCEs, so testing that group will be satisfied easily.

Thanks - appreciate it!