Adoption of Safe Harbor 401(k) and 98-52 Notice Requirement

[chris]

Client wants to adopt a safe harbor 401(k) plan with a short plan year beginning October 1, 2001. Client currently maintains no qualified plans. If the plan becomes effective on October 1, 2001, then the 3 month plan year requirement will be met. As to the notice requirement, wouldn't the following language from Notice 98-52 allow for the safe harbor notice provided to employees on September 5, 2001(today) to be deemed to be reasonable:

b. Deemed Satisfaction of Timing Requirement

The timing requirement of this section V.C.2 is deemed to be satisfied if at least 30 days (and no more than 90 days) before the beginning of each plan year, the notice is given to each eligible employee for the plan year. In the case of an employee who does not receive the notice within the period described in the previous sentence because the employee becomes eligible after the 90th day before the beginning of the plan year, the timing requirement is deemed to be satisfied if the notice is provided no more than 90 days before the employee becomes eligible (and no later than the date the employee becomes eligible). Thus, for example, the preceding sentence would apply in the case of any employee eligible for the first plan year under a newly established section 401(k) plan , or would apply in the case of the first plan year in which an employee becomes eligible under an existing section 401(k) plan.

??? Thanks.

[Guest UKH]

Yes, you are correct in regards to setting up a short Plan year effective 10/01/01. As long as deferrals are in effect for atleast 3 months you are okay.

Since your client does not have any other qualified plans, the safe harbor notice can be given as late as the effective date of the Plan. If your client issued the notice on 9/5/01-more the better. It just gives more time for the employees to consider the benefits of participating in their new retirement plan.