Employer has 2 locations, City 1 and City 2. Employer wants to implement a 401(k) Plan for City 2 employees only and exclude City 1 employees. Plan will pass the participation/coverage requirments. For ADP testing purposes, do the City 1 employees need to be included in the ADP tests if they have satisfied the statutory eligibility requirements? If the employer decides to implement a safe harbor 401(k) plan, would the City 1 employees be excluded from receiving the safe harbor nonelective contributions?

1)- As long as you pass coverage, the only employees you will have in the ADP are those who benefit under the plan (eligible city 2 employees.)

2)- You only need to provide the SH contribution to the plan participants. City 1 employees are not participants.