Setting up a new safe-harbor 401(k) Plan effective for 2007 (2 docs and 1 eligible NHCE).

Can the Plan provide for an enhanced safe-harbor match for ADP purposes on deferrals in excess of 6% of comp - i.e., 100% on employee salary deferrals up to 7% of comp ('cause $15,500 / $225,000 = 6.89%)?

No additional matching contributions to be made.

Thanks!

Yes. But that's only an ADP safe harbor, so you need to run ACP test.

If my calculator is working, that means the NHCE must contribute at least 5% (5% plus 2% = 7%), assuming all of the HCE's do the full 7%, in order to pass ACP.

Austin3515,

Isn't a safe-harbor enhanced match sufficient to avoid both ADP and ACP testing?

Or, is ACP testing required in my example because the safe-harbor enhanced match is being made on salary deferrals in excess of 6% of comp?

If that's the case, could the plan provide for a safe-harbor enhanced match of, say, 150% on salary deferrals up to 6% of comp and not have to do ACP testing?

Thanks!

SMB

To get the free ACP test, look at 1.401(m)-3(d)(3)(i): "Matching contributions are not made with respect to elective deferrals or employee contributions that exceed 6% of the employee's safe harbor compensation."

So instead of the formula you propose, if you are not concerned about the 100% vesting, you could provide 116.67% match on the first 6% deferred. Anyone deferring 6% will get a match of 7% of pay. That would get you a free ACP pass.

There are a number of other ways to do that as well, you could combine the Basic SH match with a concurrent discretionary match or use a fixed match to get the desired results.