Safe Harbor notice PRIOR to the 90 day period

[Belgarath]

Let's say the employer provides a Notice that otherwise satisfies the Notice requirements to convert existing 401(k) to a Safe Harbor nonelective, effective 1-1-04. But the employer provides this Notice PRIOR to the 90 day period - in June of 2003, to be precise. Is this a valid safe harbor Notice, and is the employer bound to honor it?

Prior to checking, I'd have said that if issued prior to the 90 day period, it wasn't valid. But note the following excerpt from IRS Notice 98-52. It says that it is a facts and circumstances test, then goes on to say that the timing requirements are DEEMED satisfied if between 30 and 90 days prior. But it really does not say that you CANNOT provide it earlier. Any opinions? Thanks.

2. Timing Requirement

a. General rule

The timing requirement of this section V.C.2 is satisfied if the notice is provided within a reasonable period before the beginning of the plan year (or, in the year an employee

becomes eligible, within a reasonable period before the employee becomes eligible). The determination of whether a notice satisfies the timing requirement of this section V.C.2 is

based on all of the relevant facts and circumstances.

b. Deemed Satisfaction of Timing Requirement

The timing requirement of this section V.C.2 is deemed to be satisfied if at least 30 days (and no more than 90 days) before the beginning of each plan year, the notice is given to

each eligible employee for the plan year. In the case of an employee who does not receive the notice within the period described in the previous sentence because the employee

becomes eligible after the 90th day before the beginning of the plan year, the timing requirement is deemed to be satisfied if the notice is provided no more than 90 days before the

employee becomes eligible (and no later than the date the employee becomes eligible). Thus, for example, the preceding sentence would apply in the case of any employee eligible for

the first plan year under a newly established section 401(k) plan, or would apply in the case of the first plan year in which an employee becomes eligible under an existing section

401(k) plan.

[Brian Gallagher]

Why not just reissue the announcement with a current date? He's got over a month to do it (ie before 12/1).

[chris]

Sounds like the e/er may not want to honor it based on the tenor of the question.... Is that the case?

[R. Butler]

Sounds like the e/er may not want to honor it based on the tenor of the question.... Is that the case?

If the employer used the "Wait & See" approach to the 3% nonelective than clearly you can get out of it. Even if you didn't use the "Wait & See" I don't know of anything that prevents the Plan from amending provisions prospectively.

[Belgarath]

Brian - yes, we realize that it can simply be reissued. But it would be interesting to know if reissue is required, or if original Notice is considered valid. Chris/R Butler - actually, at this point, we don't know if client wants to honor it or not - this isn't a case we administer (yet, anyway). If plan hasn't been amended yet, then I see no problem with "revoking" this Notice, if in fact it is valid anyway. Even if invalid, it would seem wise to notify employees that they will NOT be implementing this plan, if they decide not to.

Basically, I was just trying to get a feel for whether folks thought this Notice was valid due to the dating. There are various subsets of possible decisions depending upon timing of what is being contemplated, and whether the Notice is deemed valid or not. Thanks.

[R. Butler]

Basically, I was just trying to get a feel for whether folks thought this Notice was valid due to the dating. There are various subsets of possible decisions depending upon timing of what is being contemplated, and whether the Notice is deemed valid or not

I vote that the notice isn't valid. I know that the 30-90 is just a safe harbor, but June is double the outside time frame.