Effective Date of Safe Harbor Plan

[Guest RBlaine]

TPA/Recordkeeper provided the company with the safeharbor notice in September 2002. The company had the employee meeting and distributed the notice. TPA/Recordkeeper did not forward the plan document and amendment to the client until Feb/March 2003. The client has been making deferrals and matching contribution as if a safe harbor was in effect. Upon receipt of the documentation in Feb/March 2003, it shows an effective date of January 1, 2004 rather than the January 1, 2003 as the client expected.

Can't the document be signed in March 2003 with an effective date of January 1, 2003 and still use the Safe-Harbor for 2003 since the notice was given?

[Guest Bob K]

The effective date of the plan could be January 1, 2003, even if adopted in February or March.

However, I see two potential problems here.

First, the notice was not given within the required 30-90 period before the beginning of the plan year.

Secondly, I hope no deferrals were taken out of pay before the plan was in place. Can you clarify when deferrals started.

If the deferrals started in February or March that will be the end of the 90 day notice period. Without proper notice, the plan is not safe harbored.

[Guest RBlaine]

It was already a deferral plan. Actually, the employer made deferrals and match in 2002 because the safe-harbor notice was given in 2001 as well, but the TPA/Recordkeeper did not do an Adoption Agreement, that included the safe-harbor features, so they had to suck up the refunds for 2002.

But you are right, I forgot about the 90 day maximum on the notice date. I will verify when the meeting occured.

[R. Butler]

If there was already a 401(k) Plan in place it seems to me that the Safe Harbor provisions would have had to have been adopted January 1st.

[Blinky the 3-eyed Fish]

The safe harbor document provisions do not need to be in place until the end of the RAP. See Notice 98-52.

[R. Butler]

Blinky is correct.

Its that 3rd eye it allows him to see things that mere mortals can't.

[Blinky the 3-eyed Fish]

Thanks for the acknowledgement. I just saw The Hulk and was disappointed that radiation gave him astonishingly incredible powers, while all I got was this darned third eye. I didn't even have the power to thwart Ms. Simpson's attempt to boil me and serve me to Mr. Burns for dinner.