Existing 401(k) Plan and adding SHNEC

[Theresa]

So we have and existing 401(k) plan that wants to add a SHNEC, this can not be done mid year?  I assume it needs to be started January 1 for a calendar plan year.

[justanotheradmin]

It cannot unless the plan has never allowed deferrals. If the plan is amending to add a deferral option then yes, safe harbor can be added at the same time. 

Otherwise NO. Safe harbor cannot be added mid -year (though some in the industry wish it could be). 

[Tom Poje]

a chance possibility is the Bill in Govt will pass (I believed it has already passed the House committee), and then you could create a SHNEC retroactive (After plan year end) at 4%. so if you have a plan doomed to big failure then there may still be hope.

The Bill eliminates the safe harbor notice requirement, so without going back and looking at it, it might be in there to amend to a 3% SHNEC before the end of the year as well. my brain is crammed too full of useless stuff so I don't remember now) There is no such option for a match because of course, that depends on whether someone defers.

[Tom Poje]

even if the thing doesn't pass at least give them credit for the acronym that deserves to be in the hunor section on this board

 

https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/SECURE%20Act%20section%20by%20section_0.pdf

THE SETTING EVERY COMMUNITY UP FOR RETIREMENT

ENHANCEMENT ACT OF 2019 (THE SECURE ACT)

 

Section 102. Simplification of Safe Harbor 401(k) Rules

The legislation changes the nonelective contribution 401(k) safe harbor to provide greater flexibility, improve employee protection and facilitate plan adoption. The legislation eliminates the safe harbor notice requirement, but maintains the requirement to allow employees to make or change an election at least once per year. The bill also permits amendments to nonelective status at any time before the 30th day before the close of the plan year. Amendments after that time would be allowed if the amendment provides (1) a nonelective contribution of at least four percent of compensation (rather than at least three percent) for all eligible employees for that plan year, and (2) the plan is amended no later than the last day for distributing excess contributions for the plan year, that is, by the close of following plan year.

[CuseFan]

Yeah, love these legislative acronyms, but still waiting for the Working Toward the Future Act - although a colleague said he thinks most could be called that.

[Jim Chad]

One idea is to change to a "Jun1, 2019 to May 31, 2020" plan year.

Then deferrals could be maxed in 2019.