Safe Harbor 401(k) Plans

[J. Bringhurst]

From reading Notices 98-52 and 2000-3, I see no prohibition from switching between safe harbor matching contributions and safe harbor non-elective contributions on a year-by-year basis as long as (1) proper notice specifying the method is given each year and (2) the plan is properly amended to specify the method.

1. Does anyone see any problems with this or has anyone seen anything specifically permitting or prohibiting this?

2. Can anyone read Notice 2000-3 to permit a mid-year switch from the safe-harbor matching contribution to the safe harbor nonelective contribution (i.e., plan adopts safe harbor match, exits mid-year before making a contribution, and elects non-elective method on or before December 1)? Is this possible or would it fail due to the fact that the notice would not accurately describe the safe harbor formula?

[R. Butler]

1. It is permissable for the Sponsor to use different safe harbor methods from year to year.

2. I may be too conservative, but I wouldn't recommend a mid-year switch from matching to nonelective for several reasons. In addition to the notice problems I don't see how you can suspend the matching contributions without meeting the requirements of 2000-3, Q&A 6. What you propose does not meet the requirements.

[Tom Poje]

I would agree switching from match to SHNEC or back shouldn't be a problem on an annual basis, but it raises a question.

Is the Notice provided to be thought of as 'an amendment' or a 'board of resolution'? If your document only contains language for a safe harbor match, how are you going to switch to a SHNEC? You might have to amend to accomplish what you want.