Maybe Notice of SH Match

[DP]

I have a client with a 401k plan which has a discretionary match. The company historically has given a match of 100% up to 5% of comp. This match has a last day of employment rule.

I want to give out a Maybe Notice that this match could be "classified" as a Safe Harbor contribution for 2004.

Am I allowed to say this in the Maybe Notice? Or does the Safe Harbor contribution have to be a separate match?

Thanks.

[R. Butler]

Only give a "maybe notice" if you are using the 3% nonelective.

[DP]

Can the discretionary match be classified as a Safe Harbor enhanced match at the end of the year, if needed, without giving any kind of notice?

[Tom Poje]

the reason:

if you say maybe to the 3%, it shouldn't effect an individuals choice to defer

but the match will have a bearing if someone chooses to defer, therefore you are not allowed to say 'maybe'

[DP]

Thanks for the information about the Maybe Notice.

But can the discretionary match be reclassified as Safe Harbor at year end if it looks like the ADP test is going to fail? Or does it have to be set in stone before the beginning of the plan year?

The participant's are still going to get the same rate of match. And it would be to the participant's advantage if it was reclassified as Safe Harbor.

[Archimage]

No, you have to give a notice before the beginning of the plan year.

[DP]

Thanks to all of you.

[RCK]

Does the Safe Harbor notice have to be given before the beginning of the plan year or 30 days before the beginning of the plan year?

RCK

[Archimage]

Notice 98-52 states that the notice must be given within a reasonable time before the beginning of the plan year. The IRS has stated that a reasonable time can be satisfied if given 30 day before the beginning of the plan year but no more than 90 days.