This provision was added to our PPA documents at the request of a customer and was carried over to our Cycle 3/Post PPA documents. It is not very commonly used. The purpose would be to offset a profit-sharing contribution by a safe harbor non-elective contribution.
For example, where a plan excludes HCEs from the safe harbor non-elective contribution and has a pro-rata profit sharing formula, the employer could choose to give the same 3% as a profit-sharing contribution to just the HCEs. This results in a total 3% employer contribution to all employees consisting of safe harbor non-elective to the NHCEs and profit sharing to the HCEs.
NOTE: this provision would not need to be elected to include safe harbor non-elective contributions towards top heavy, gateway, and rate group testing in plans with a new comparability profit sharing formula.