Safe Harbor 401(k) Examples
September 3, 2004 |
We often receive calls asking whether certain matching contribution formulas may be used in a safe harbor 401(k) plan. Following are a number of different examples from the inquiries we receive.
Acronyms Used Below:
SH = Safe Harbor
$/$ = Dollar for Dollar match
50%/$ = 50 cents match per dollar
25%/$ = 25 cents match per dollar
|
The Plan's Allocations |
Testing or No Testing |
Comments/Other |
| |
Plan 1
Elective Deferrals — 50% Limit
SH Match — Basic Formula
|
No ADP Test
No ACP Test
Exempt from Top-Heavy Test |
NA |
| |
Plan 2
Elective Deferrals — 60% Limit
SH Nonelective — 3%
|
No ADP Test
No ACP Test
Exempt from Top-Heavy Test |
NA |
| |
Plan 3
Elective Deferrals — No Limit
SH Match — Basic Formula
Discretionary Employer — 2% |
No ADP Test
No ACP Test
Top-Heavy Test Required |
Only a safe harbor plan with no employer allocations is exempt from the top heavy test. |
| |
Plan 4
Elective Deferrals No Limit
SH Match — Basic Formula
Forfeiture Allocation Contribution . |
No ADP Test
No ACP Test
Top-Heavy Test Required |
Only a safe harbor plan with no employer allocations is exempt from the top heavy test. Even a forfeiture allocation is considered an employer allocation |
| |
Plan 5
Elective Deferrals — No Limit
SH Nonelective — 3%
Discretionary Match — $/$ to 3%
|
No ADP Test
No ACP Test
Exempt from Top-Heavy Test |
Safe Harbor 3% NEC also satisfies the ACP Test provided matching is not made in excess of 4% of compensation and provided the matching is not made on deferrals above 6%. |
| |
Plan 6
Elective Deferrals — 40% Limit
SH Enhanced Match — $/$ to 5%
Discretionary Match — 50%/$ to 5%
|
No ADP Test
No ACP Test
Exempt from Top-Heavy Test |
The discretionary match need not be tested provided it does not provide more than 4% in compensation and provided it does not match deferrals over 6%. |
| |
Plan 7
Elective Deferrals — No Limit
SH Nonelective — 3%
Discretionary Match — 25%/$ to 8% |
No ADP Test
ACP Test Required
Top-Heavy Test Required |
The discretionary match exceeded the 6% deferral limit which would not allow the ACP safe harbor to be satisfied and thus requires testing. |
| |
| Check out our 401(k) Safe Harbor Chart and Our 401(k) Safe Harbor Page |
To learn more, call 973-492-1880 or e-mail info@mhco.com.
© 2012, McKay Hochman Co., Inc. All rights reserved.
