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Ok, I know this one has been covered before, but I am not certain it has been addressed in the following manner. Regarding mid-year amendments to SIMPLE IRAs, the IRS has provided some guidance in the form of an LRM (2005 LRM) and a 2012 Newsletter suggesting that a mid-year amendment is not permitted. However, what isn't clearly addressed is what portion of the code/regulations the IRS is relying on to come to their conclusion as well as what the consequences would be. My thoughts are as follows: Since SIMPLE IRAs are governed solely by IRC 408(p) and Notice 98-4 (the LRM and Newsletter to not qualify as code/regulations), and Notice 98-4 clearly states that an employee must be provided with annual notices (e.g. summary description and right to defer, including right to select financial institution if applicable) prior to November 2 of each year; a mid year amendment affecting the information required to be in such notices would result incorrect notices having been provided and thus, not meeting the notice requirements. That being said, my understanding is that the consequence would be a $50/day penalty (pursuant to Notice 98-4, Q&A section G). Beyond that, I am not aware of any additional consequences formally provided in the code/notice. The SIMPLE IRA fix it guide addresses the situation and simply provides that a reasonable correction should be made. As a result, it would seem to me that if a sponsor was willing to accept a $50/day penalty and make reasonable corrections (depending on the situation), a mid-year amendment could be made. Is there anything I am missing or any other portion of the code/notice for SIMPLE IRAs that I haven't considered that prohibits mid-year amendments? Thoughts are greatly appreciated.

We are taking over a client that is currently funding a 5% non-elective safe harbor. Can they reduce this to 3% mid-year without having to do ADP/ACP testing?