It’s one of those Safe Harbor quirks

A safe harbor matching contribution should have the same eligibility as deferrals if you want that safe harbor protection of satisfying Top Heavy and the ADP/ACP test. A plan sponsor just reached out to me about their plan where they changed their deferral eligibility to 90 days while keeping the eligibility for the match at age 21 and one year of service.  The problem is the plan is now top heavy and the third-party administrator (TPA) just discovered it’s been top-heavy for years, ever since they made the change.

I was surprised that the TPA messed up so much because the plan document I use, won’t even let me offer those parameters where the deferrals and the safe harbor match have different eligibility conditions.  Now, the plan sponsor is going to pay up and is looking at the TPA to blame.

Just something you should know.

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