FAQ 200: Allocations--Top heavy minimum calculation not including the safe harbor source

Problem:

I am having problems with a cross-tested plan. I have set up the plan to have a 3% safe harbor non-elective contribution in source 4, and a source 2 contribution of 2% to group 2 and group 1 getting the 415 maximum.

I have set up the plan specs so that the top-heavy minimum is reduced by both source 2 and source 4. However, when running calculations, the system is giving the employees a 3% safe harbor contribution, and a 3% source 2 contribution, for a total of 6%. It appears that the system is not using the safe harbor contribution to reduce the top-heavy obligation.

I can get the system to do the allocation the way that I would like by changing the top-heavy minimum percent in the specs to 0.00%. However, since I shouldn't have to do this, I wanted you to look at it to see if I'm doing something wrong.



Solution:

As mentioned in the warning message that shows up when you run calculations, any source other than source 2 needs to be coded as "input" if it is to be used to meet the top-heavy obligation. Failure to do that can result in odd allocations like you are seeing. If you do the following, you should get the results that you are after:

1) Go to the Top Heavy Years screen in the specs and change the current plan year to "N-Never Top-Heavy" and save the specs.

2) Run calculations so that a full 3% is allocated to the safe harbor source (source 4).

3) After checking the source 4 allocation, go back to the Top Heavy Years screen and change the current plan year back to "T-Top-Heavy". Also go into the source 4 specs, change the Force Contribution field to "Yes-Use Transactions/Input by EE", and change the Contribution Fund Split field to "99-Input". This will "lock in" the source 4 contribution, so that the system can then use it to cover the top-heavy minimum.

Then if you re-run calculations, you should see the top-heavy minimum being met by source 4, and the new comp allocation being done in source 2.