safe harbor 401(k) plan

[Guest Mike Schwing]

My plan uses a prototype document and it indicates the plan is a safe harbor basic match 401(k) plan in the document. It is discovered the employer failed to provide the safe harbor notice to the employees.

The ERISA outline book indicates under 6.c of chapter 11 that "A failure to provide the safe harbor notice would not necessarily mean the section 401(k) arrangement is disqualified. It would, however, mean that the ADP test would be run for the that plan year. To the extent correction of the failure by providing a late safe harbor notice is not available, it seems reasonable that the plan should be able to protcet the qualified status of the 401(k) arragment by simpy running the ADP test (and ACP test if applicable) even though the plan document might state that the plan is intended to be a safe harbor plan."

Does anyone know if there is any further guidance on this? If you run the ADP test is the employer still required to follow the basic safe harbor match formula becuase it is written this way in the document? i.e. they still have to follow the formula but you must test the plan becuase they failed to give the notice.

[MWeddell]

I've not dealt with your situation and hence haven't specifically researched it, but your suggested resolution seems correct. I believe that Notices 98-52 and 2000-3 somewhere provide that if you fail to meet the safe harbor then one performs ADP / ACP testing, presumably on a current year testing method basis. However, you'd still be obligated to contribute the safe harbor match, although this is a matter of interpreting your plan document which I've not read.