Safe Harbor 401(k) Question

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I have acquired a plan that was poorly designed. It is a 401(k) safe harbor with the SHNEC. The document currently contains no matching provisions. Is it possible to add discretionary matching provisions without losing safe harbor status. I thought so initially and then I starting to go back and read through Notice 98-52 and now I lean towards it not being allowed. I reference the content requirement:

The content requirement of this section is satisfied if the notice (1) is sufficiently accurate and comprehensive to inform the employee of the employee's rights and obligations under the plan and (2) is written in a manner calculated to be understood by the average employee eligible to participate in the plan. For purposes of the preceding sentence, a notice is not considered sufficiently accurate and comprehensive unless the notice accurately describes (i) the safe harbor matching or nonelective contribution formula used under the plan (including a description of the levels of matching contributions, if any, available under the plan); (ii) any other contributions under the plan (including the potential for discretionary matching contributions) and the conditions under which such contributions are made; (iii) the plan to which safe harbor contributions will be made (if different than the plan containing the CODA); (iv) the type and amount of compensation that may be deferred under the plan; (v) how to make cash or deferred elections, including any administrative requirements that apply to such elections; (vi) the periods available under the plan for making cash or deferred elections; and (vii) withdrawal and vesting provisions applicable to contributions under the plan.

Would you agree that the match cannot be added to keep safe harbor status?

[Tom Poje]

I would think that you could add one for the future (just like you could modify the document and switch from one type of safe harbor contribution to another)

as to whether you could add a match during the current year....well, I am not sure - I would tend to agree I don't think it would be possible.

How would you handle someone who deferred maximum at the start of the year and wouldn't get a match if match was from date of amendment. If match was made retroactive, you have a similar problem - someone who didn't defer at the start of the year will get shortchanged.

now, it would certainly be possible to add the match, take the safe harbor on the ADP test and run an ACP test, and if plan is top heavy provide a top heavy.

[Alf]

I don't agree that the notice requirement prevents it. Your notice was correct when sent and I don't know of any authority for the fact that you can't change eligiblity, contribution, or distribution provisions prospectively during the year just because you sent out a safe harbor notice becore the beginning of the year.

I am not sure that you will get an ACP pass if you add the match in the middle of the year though.