FAQ 602: Allocations--New comp allocation splitting safe harbor allocation between SH and PSP source for terminated employees


A new comp plan with safe harbor non-elective 3% contrib is coded to give the two principals a 6% allocation for the profit sharing portion, for a total of 9%. The rank and file just get the safe harbor. The terminated participants who are entitled to a contribution are getting a 2.99% safe harbor and a .001% profit sharing contribution. Can you tell me why that is?


Delete the dollar amount in the Discretionary Amount field under the "Show Total Contrb." button in the source 2 specs. The system will then calculate the 3% safe harbor (source 4) for the terminees and calculate 6% for group 1 principals as indicated in the new comp coding under contribution allocation parameters when you rerun valuation calculations.

You should also note that although the plan is not currently coded as top-heavy, if it does become TH, your TH minimum "Groups Eligible for Minimum" coding should match that of the safe harbor source 4 "Contrib: Groups Elig." field. This can also cause discrepancies in the SH/TH contributions in calcs or in the budget routine.