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Hi There is an ongoing discussion in one of the companies I work with. They are evaluating moving from a SIMPLE 401k plan to a Safe Harbor plan, to ensure that the compliance tests are passed and to enable a possible Mega Backdoor Roth plan. I have been able to simulate the tests and with the Simple 401k plan, the ACP falls into non-compliance quite quickly. However, I've done some research and found that Safe Harbor plans offer some type of waiver over tests. But I've also found that after-tax contributions do not qualify for safe harbor test exemption, meaning that even when the company adopts a safe harbor strategy, it is very likely we would fail the ACP test. Can someone help me confirm if safe harbor plans with after-tax contributions are subject to ACP testing? (and, why are they called safe harbor if they are not entirely safe?). Thank you so much for your help! FR

If a company has a 401(k) plan with safe harbor contributions, and the company wants to implement a one (1) year of service requirement for said safe harbor contributions, can we implement this requirement retroactively to January 1, 2023 or do we need to specify a date in the future, since there are 2023 hires who are eligible under the current requirements - or lack there of?

Background: Client purchased a plan with automatic enrollment and safe harbor match, with an effective date of 7/1/2021. The plan went live on our system, census was uploaded and participants were notified of their eligibility to participate, received all the required notices, and should have been automatically enrolled if they did not opt out. Client has now reached out (along with their financial advisor) saying that they never wanted automatic enrollment, didn't understand it, and now wants to "cancel" the plan. They have not done any withholding of ANY elective deferrals at this time, so the plan has not been funded. I am of the opinion that since notices have gone out, accounts have been set up, etc. they have a 401(k) plan, and they cannot just "cancel" it, i.e. pretend it never happened. I know how to correct the failure to automatically enroll participants so that is not the issue. Our main point of contention and one I am having difficulty finding any guidance on is; at what point can we say, "sorry, you officially have a 401(k) plan so you have to fund any required contributions and go through the normal termination process to close it"? I believe the plan is active, and that they need to go through the correction process for the automatic deferral failure and then they can terminate the plan. The client contends that since they have not funded, the plan is not active and we should be able to just "cancel" it. We've already told them that they can remove the automatic enrollment provision, so that is not the issue. If I anyone can point me to some guidance on this topic, it would be much appreciated.

I need some help i have 3% nonelective safe harbor plan eligibility for deferrals is 6 months with quarterly entry. eligibility for safe harbor is 1 year with quarterly entry. plan uses entry date compensation for those that enter mid-year The plan is top-heavy for 2020. I know I have to give the top heavy contribution to those that are only eligible for deferral, to satisfy top heavy. I assume i need to make an additional contribution to those that entered mid year for the safe harbor, so that they receive 3% of full year compensation. is this correct? Thank you for your time!

A controlled group is made up of two entities and one of the entities would like to revoke Safe Harbor mid year. All the HCEs are in the entity that is revoking Safe Harbor. How would the 2020 Coverage Test be performed for the 401(m) portion? Are all the NHCEs considered as benefitting due to the Safe Harbor for the partial year? Any feedback is appreciated!

I have a brand new start-up plan that started 1/1/19. The owner is just now calling me 12/11/2019 wanting to amend the plan to a SH plan because the company did well and he has extra funds to put to work (and not get taxed on). Obviously it is too late for that. And it is too late to change to SH for 2020. BUT... the owner is saying that his accountant, other attorneys and colleagues of his are saying we should be able to back date this and be able change the plan to SH for 1/1/2020 plan year. I can tell you that my Trust Co. and our TPA partner would never go for ever doing something like that. But since the feedback he is getting is that should be okay he thinks there should be no problem doing that, especially if each employee signs off that they received their SH notice. Thoughts/opinions on how to handle? His other question is something I do not know the answer to. He asked if he terminated his plan and went to another company and started a new Safe Harbor plan elsewhere - that would be effective for 2020 - would be allowed to do that??? OR if decided to terminate services with us and convert the plan to a new provider and changing it to a SH Plan - what are the dates and deadlines for that? Could he in fact do that and have it be effective some time in 2020?? Any feedback will helpful! TIA!

Ongoing debate regarding whether a safe harbor 401(k) plan can impose different eligibility requirements for deferrals than for match. Opinions please!