Revocation of Safe Harbor Match Contribution

[Guest ELS]

It is my understanding that a plan sponsor may amend the plan during the current plan year to eliminate the safe harbor match contribution for a plan year after issuing the required notice to participants. Is this correct? Any suggestions on language to use in the notice, and is 30 days notice to the participants enough?

I am also wondering if an employer can decide to deposit the entire safe harbor contribution after the end of the plan year, and in this way leave themselves open to the option of amending the plan during the plan year to eliminate the safe harbor match. This would be similar in operation to the supplementary notice for the 3% non-elective contribution issued 30 days prior to the end of the plan year.

Additionally, can the plan sponsor then place the plan back into safe harbor status by issuing the required notice 30 to 90 days prior to the start of the next plan year?

Thanks for your feedback

[R. Butler]

A plan can suspend the safe harbor match. See Notice 2000-3, Q&A 6 for details

Although the match doesn't have to be deposited until the due date of the employer's federal tax return, it accrues as the employees make deferrals. You can't revoke and avoid paying the portion that has accrued.

I don't see any reason why an employer that suspends in year 1, couldn't do a safe harbor in Year 2.

Hope this helps.

Rick