Amend for Safe Harbor Non-elective

[Guest MEWilson]

Employer has a 12/31 401(k) Plan. Can they amend their existing 401(k) Plan during 2004 for Safe Harbor Nonelective for 12/31/2004 plan year end or will that amendment have to be effective for 2005?

[R. Butler]

Can only amend to safe harbor nonelective in '04 if they gave the "maybe" notice before the beginning of the plan year.

[Guest philc]

What if an employer wants their existing 401(k) plan to be safe harbor for the 2004 calendar year plan year, distributes the Notices in November '03 but doesn't actually adopt the plan amendment including the safe harbor provisions until after 1-1-04?

Notice 98-52, Sec. XI indicates the employer must adopt the safe harbor provisions before the first day of the plan year. Not before the end of the plan year as with certain other plan amendments. Is that what you've been doing?

[R. Butler]

See Notice 2000-3, Section D.III. Q&A.1. You can amend a 401(k) plan during the year (but no later than 30 days prior to the plan year end) provided you mett certain requirements.

[Guest philc]

But what about a plan that wants to utilize the matching method to satisfy S-H? That plan must be written with the S-H provisions and adopted before the beginning of the plan year?

[R. Butler]

Yes, unless it is a new plan or adds a 401(k) provision for the first time during the year.

[Guest philc]

Thanks. So the Remedial Amendment Period language in Sec. XI B. of Notice 98-52 has no application to an existing plan that wants to add a S-H match 1-1-04 for example. They have passed their GUST RAP and their plan would have had to have included the S-H Match as of 1-1-04 and adopted by that date? They don't have until 12-31-04 to adopt the S-H Match retro to 1-1-04. Am I correct in this?

[R. Butler]

Agreed.

Regardless of the RAP, the fact that a Safe Harbor Notice was likely not given timely would negate safe harbor anyway.

[Guest philc]

Thanks again and not sure this matters but the S-H Notice was given timely (Nov. '03), it's just that they didn't sign the plan amendment with the S-H provisions in it until after 1-1-04.