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proposed mid-year amendment to safe harbor enhanced match allocation


melba99
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Our plan currently has a safe-harbor enhanced match allocated each pay period with no true up at the end of the year.  We now wish to do a true-up at the end of the year.  The plan document provider says to amend the plan now to provide for the match allocation to be at year-end, with pre-funding per payroll period, rather than having the plan provide for a per-pay period allocation, with a true-up at the end of the year.   Is there a difference between the two approaches?  Thanks.

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Our document provider (FT William) gave similar instructions.  Their Q&A on the topic says that the amendment must be effective at least 3 months prior to the end of the plan year (with an updated safe harbor notice).

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  • 2 weeks later...

I believe the difference between the two approaches is the timing of the deposits.  If you have  pay period allocation, the deposits are considered late if they are not made by the end of the quarter following the quarter allocated.  But if the document states year-end/annual, then you have until the company's tax return deadline to fund.  And as you said, you can "pre-fund" and then true-up at the end.     

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With the new cycle 3 docs, at least per FT William, if you elected in the Adoption Agreement under "Determination Period for Safe Harbor Matching Contributions" any option other than "End of Plan Year" (so more frequently than annually), and you want to make a true-up, you need to amend the document to choose "End of Plan Year" no later than 3 months before the plan year ends. 

I'm sure other documents have different provisions, but FT explained that was per the IRS and their new match requirements.

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