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Springing Safe Harbor


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Hi, 

Plan is terminating due to asset sale and the term date is 07/08/2022, since the plan is terminating Mid-year should a safe harbor notice be sent and will an amendment be required? 

Thanks

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I am going to hijack this thread.  I have a plan terminating also due to an asset sale effective 8/1/2022.  Does a safe harbor 3% need to be done for 2022? 

4 out of 3 people struggle with math

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RBR - yes, the 3% is required. The real question is whether you want to revert to ADP/ACP testing or not, and whether to preserve the top heavy exemption. Since due to an asset sale, you have the option to pay the required 3%, and preserve the safe harbor status for the short year, preserve the top heavy exemption, and avoid ADP/ACP testing. (I'm assuming no other contributions that would otherwise invalidate the top heavy exemption anyway.)

If you don't choose this option, then you still have to pay the 3% for the short year, but you must test for ADP/ACP, and you lose your top heavy exemption since now it isn't a safe harbor plan.

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On 7/7/2022 at 9:44 AM, Belgarath said:

RBR - yes, the 3% is required. The real question is whether you want to revert to ADP/ACP testing or not, and whether to preserve the top heavy exemption. Since due to an asset sale, you have the option to pay the required 3%, and preserve the safe harbor status for the short year, preserve the top heavy exemption, and avoid ADP/ACP testing. (I'm assuming no other contributions that would otherwise invalidate the top heavy exemption anyway.)

If you don't choose this option, then you still have to pay the 3% for the short year, but you must test for ADP/ACP, and you lose your top heavy exemption since now it isn't a safe harbor plan.

Just pointing to my original question will a Mid-year notification be required and if an amendment be required?  

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