New 401(k) Safe Harbor Plan with effective Date October 1, 2018. Plan Year Ends 12.31.2018 so a 3 month plan year. According to the regulations the new plan must be in place for 3 months to meet the safe harbor provision:
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—
(i) The plan is not a successor plan; and
(ii) The cash or deferred arrangement is made effective no later than 3 months prior to the end of the plan year.
Operationally, it has taken a few weeks for the platform recordkeeper, advisor and plan sponsor to get enrollment meetings done and everything in place to start deferrals which will occur with the first payroll in November.
Is Safe Harbor Status negated if the first deferrals do not occur with the first payroll in October? The regulation language seems to be very broad and does not specify that the first deferral must occur with the first payroll in October. Although a very conservative interpretation could be taken to mean just that.
