Safe Harbor Notice

[Lynn Campbell]

If an employer has a safe harbor 401k and for the current year is making a 3% nonelective contribution - and he decides NOT to make that contribution in the next Plan Year - what is required? A Notice to that effect? I assume a Plan amendment would be needed?? Is the safe harbor plan designed so that each year a decision must be made about the safe harbor contribution?

[KJohnson]

Is the safe harbor plan designed so that each year a decision must be made about the safe harbor contribution?

That is the question to ask and it is primariliy a plan design question. A safe harbor NEC can be designed two ways. The Plan can say that the NEC will be made for each year from X date forward. If this is the case then your notice would be "definitive" and you would need a plan amendment to get rid of the safe harbor NEC prior to the beginning of the year.

An alternate design exists with the "maybe" notice. In that instance the plan states that the employer may or may not give the 3% and that the employer will notify the employees within 30 days prior to the end of the plan year whether the 3% will be made. If the contribution is made, the employer must affirmatively amend its plan to reflect this contribution. If it is not made, I don't believe that you have to do anything.

Ken