Existing P/S Plan With CODA adopting Safe Harbor Provisions

[Guest ROB VIDOVICH]

An existing P/S Plan added a Deferral and Match provision effective 3/1/2000. Plan has 5 HCE's and 5 NHCE's. Plan failed ADP and ACP Tests and was Top Heavy for 2001 Plan Year (2/28/01 PYE). Refunds of Excess Contributions and Excess Aggregate Contributions were made along with a Minimum 3% Top Heavy Contribution. Owners want to contribute maximum if possible, can they adopt the Safe Harbor provisions effective 3/1/2002 allowing for a 3% Non-Elective Employer Safe Harbor Contribution Formula???? It looks like the plan will fail the ADP and ACP Tests and is Top Heavy for the 2002 Plan Year.

It seems that the 3% Non-Elect. Contribution would satisfy the Non-Discrimination and Top Heavy Tests if adopted.....

[John A]

I believe that the safe harbor provisions could be effective for the plan year beginning 3/1/02 as long as the notices are provided by a "reasonable" period of time before 3/1/02 (30 days would definitely meet the requirement) and the amendment is adopted prior to 3/1/02. You might also consider providing a "maybe" notice to give the employer a longer time to decide for sure.