Restating a 401(k) Simple Plan

[pbarrett]

Help!

We have a client who wants to get rid of his 401(k) simple plan and replace it with a nonstandardized 401(k) plan. Currently, deferrals and match contributions are made on a payroll basis. I'm thinking of using restating the plan to a nonstandardized 401(k) effective 7/1/02. Does anyone see any problems there? Any special notices required?

[R. Butler]

The only guidance I am aware of is Rev. Proc. 97-9. 97-9 provides a Model Notice of termination, but it clearly says it can only be used if you revoking at year-end.

I am unaware of anything that says you can't revoke mid-year. (97-9 only speaks to the Model Notice.) If Plan does revoke it would be subject to ADP/ACP and at a minimum I would give a 30 day notice of revocation to all employees, similar to the one you need to revoke a Safe Harbor mid-year.

[Mike Preston]

It also would be subject to the top-heavy rules that Simple plans escape. I don't see the need to provide 30-days advance notice in the case where a plan is providing, for every contribution level, an increased or the same match. But, if it is decreasing anything, including vesting on the match, I agree that 30 days and the opportunity to change one's election is a good idea.