Safe Harbor 401(k) Plan October 1st deadline

[Ananda]

There is an October 1st deadline for setting up a safe harbor 401(k) plan. Is anyone aware of any exceptions to this deadline for setting up a safe harbor plan after October 1st?

[Bill Presson]

No. The plan has to allow for deferrals for 3 months.

[Lou S.]

 As Bill correctly states you need 3 months of deferral. So October 1 is/was the deadline for a calendar year 401(k). You could set up a Non Calendar year safe harbor 401(k) today on December 1 with a plan year from December 1, 2021 - November 30, 2022. In that case someone could defer the 2021 calendar year limit of $19,500 (or $26,000 if catchup eligible) in December assuming they have the salary and election to support that.

[Ananda]

Thank-you for your responses. If I set up a fiscal year plan starting December 1, today, isn't there a 30 day advance participant notice requirement for safe harbor plans?

[Lou S.]

Non-elective or matching? If matching then yes you are supposed to give notice 30-90 days prior to the start of the Plan year. If notice is given less than 30 days before the start of the Plan year then you need to document why the shorter notice period is reasonable. I personally would argue that a plan that was just put in and notice delivered immediately is reasonable, others might argue differently.

[hsctpa]

If it's an existing plan, the SECURE Act allows for adoption of the Safe Harbor nonelective up to 30 days prior to the end of the plan year.

[Kevin C]

On 12/1/2021 at 10:34 AM, Ananda said:

There is an October 1st deadline for setting up a safe harbor 401(k) plan. Is anyone aware of any exceptions to this deadline for setting up a safe harbor plan after October 1st?

The only exception to the three month plan year requirement in the Regs is for a newly established employer.

Quote

 

1.401(k)-3(e)(2) Initial plan year. A newly established plan (other than a successor plan within the meaning of §1.401(k)-2(c)(2)(iii)) will not be treated as violating the requirements of this paragraph (e) merely because the plan year is less than 12 months, provided that the plan year is at least 3 months long (or, in the case of a newly established employer that establishes the plan as soon as administratively feasible after the employer comes into existence, a shorter period). Similarly, a cash or deferred arrangement will not fail to satisfy the requirement of this paragraph (e) if it is added to an existing profit sharing, stock bonus, or pre-ERISA money purchase pension plan for the first time during that year provided that—

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