The question is, since a plan offering safe harbor 3% non-elective contribution is not subject to top heavy testing, if they have immediate elgibility for employee salary deferrals, but a one year wait for safe harbor contributions, does that make them still subject to top heavy for the employees who are deferring who have less than one year of service but 1000 hours of service by the end of the plan year?
MikeD
Dec 5 2006, 06:23 PM
Yes. Basically, the plan you describe is being tested as two plans...one plan for the statutory excludable employees and one for those who are not. The "plan" for the nonexcludable employees receives the top-heavy exclusion. However, since the "plan" for the excludable employees does not allow safe harbor contributions, that plan is subject to top-heavy minimum contributions (and an ADP test). In your case, basically, everyone who is eligible to make 401(k) contributions is going to get 3% of pay (it's just a matter of what you call it - top-heavy minimum or safe harbor)