We have an employer interested in adopting Safe Harbor Match and wants to change the minimim deferral contribution percentage currently listed in the adoption agreement from 1% to 3%. Would he be able to do this or would this be discriminatory against the NHCE's?

You need to look at the number of NHCE's and HCE's who defer 3% or more. It may be discriminatory if less than 70% of all eligible NHCE's defer at least 3%. Without having all of the facts and circumstances, I would say look at the current availability of the increase, based upon current deferral rates.

I would have said that this was prohibited by Notice 98-52.

I agree with Medusa. See 98-52 V.B.1.c.ii ("Restrictions on Amounts of Elective Contributions") and 2000-3 Q-3 & A3. The only minimum deferral % allowed to be required in a Safe Harbor 401(k) is 1%.

I concur. I overlooked the "safe harbor" in the original post.