Plan is safe harbor match with immediate entry for 401(k) and 1 year wait for safe harbor match. Participant is hired in March, 2005. He earns $100,000 in 2005. For 2005, he is an otherwise excludable employee so he does not have to be included in an ADP test. In March 2006 he becomes eligible for the safe harbor match. For the 2006 plan year, how do you test his deferrals? He satisfies the safe harbor from Match - December, but does not satisfy it from January - February. He is also no longer an otherwise excludable employee, since he does have 1 year of service.

For 2006 he is not otherwise excludable. He must begin receiving the match when he enters the safe harbor match plan. If the plan satisfies the requirements for a pay as you go SH match, he will be matched only on his deferrals after entry. His deferrals before netry will be covered by the safe harbor and not tested.

If, however, the plan does not meet the requirements for a pay as you go SH match, he has to get the whole years contribution since he participated in the 401(k) for the whole year