The gateway is a minimum contribution requirement for using certain cross-testing designs. Meeting it is only the first step; it is not a passing test result.
The rule in plain English
For the common minimum-allocation gateway in a standalone defined contribution plan, each NHCE benefiting under the arrangement must receive at least the lesser of one-third of the highest HCE allocation rate or 5% of compensation. An allocation rate is the relevant employer nonelective contribution divided by the applicable compensation.
| Highest HCE rate | One-third of that rate | Minimum gateway |
|---|---|---|
| 9% | 3% | 3% |
| 12% | 4% | 4% |
| 15% | 5% | 5% |
| 18% | 6% | 5% |
If the highest HCE rate is 12%, start with a 4% gateway. If it is 18%, the gateway is 5%, not 6%. Use the highest applicable HCE rate, even if that person is not the owner whose contribution you are focused on.
Turn the percentage into dollars
Suppose the owner receives $36,000 on $300,000 of compensation: a 12% rate. An employee earning $60,000 has a 4% gateway, or $2,400. A second employee earning $40,000 has a $1,600 gateway. Both receive the same percentage, even though the dollars differ.
Do not apply 4% to average payroll and assume every individual is covered. The requirement must be met for the relevant employees individually, using the correct compensation definition.
How a 3% safe harbor contribution fits
| Contribution source | Rate | Amount |
|---|---|---|
| Existing safe harbor nonelective | 3% | $1,800 |
| Additional nonelective contribution | 1% | $600 |
| Total counted toward gateway | 4% | $2,400 |
An eligible safe harbor nonelective contribution can count toward the gateway. That means 3% plus 1% can reach 4%; it does not mean 3% plus another 4% is always required. A safe harbor match does not count in the same way.
Why 5% does not guarantee a pass
The gateway allows the plan to proceed with this testing approach. The separate nondiscrimination analysis may require more employee funding, a lower owner allocation or a different structure. Older staff, a younger owner, or multiple HCEs can change the result.
Eligibility also matters. For example, an employee who receives a safe harbor nonelective contribution may have a gateway requirement even if the employee would not otherwise receive discretionary profit sharing. Do not remove terminated employees before the provider reviews them.
A little more detail
Other regulatory routes to benefits-based testing exist. Combined defined benefit/defined contribution arrangements have additional rules. The examples here explain the common standalone DC minimum-allocation gateway, not every possible design.
Explore the next step
Try the free scenario calculator with hypothetical inputs, or compare more allocation examples. The methodology guide explains what the calculator does and does not test.
Sources & further reading
- Treasury Regulation §1.401(a)(4)-8: cross-testing and the gateway
- Treasury Regulation §1.401(k)-3: safe harbor requirements
- Treasury Regulation §1.401(a)(4)-9: combining plans for testing
Educational content updated September 18, 2026. Examples are fictional; they illustrate funding choices and do not constitute final testing or plan-specific advice.