Timing of safe harbor plans

[Guest mad]

When is the last day that an existing plan can adopt a 3% safe harbor plan? for example, for plan year 2003 is the last day December 1, 2002?

[wmyer]

If the existing plan is a 401(k) plan and the 2003 plan year is on the calendar year basis, then the answer is generally yes.

[Guest Ducks]

What about if the plan did not exist and is not a successor plan. Actually, let's consider it an employer's first plan ever implemented...

How about for 2004 plan year.

Can one put a Safe Harbor 401k Plan in place for 2004 plan year all the way up to 12/2/2004; use the Safe Harbor Non-Elective contribution and base it on compensation for entire year 1/1/2004 - 12/31/2004. I understand that the documentation cannot be made retroactive to 1/1/2004 for safe harbor, and that a short plan year exists then from 12/2/2004 - 12/31/2004, because employer wants to use calendar year plan year.

This assumes that at plan adoption 12/2/2004 one distributes proper notice to all eligible employee's.

Additional question about what limits have to be pro-rated. I understand compensation limit 401(a)(17) has to be pro-rated as 1/12. So, 205,000/12 = $17,083 is max comp that could be used for all plan purposes?

415 limits have to be pro-rated ?

404 Deduction Rules are different it seems and strictly driven by employers tax year?

Any help is much appreciated.

Thanks.

[wmyer]

Safe Harbor plan has to be in existence for at least 3 months. Therefore, October 1, 2004 would be the deadline for a 2004 Safe Harbor 401(k) plan. Notice would have to be by October 1, 2004. [iRS Notice 98-52, 2000-3.] Plan could use either non-elective or matching.

You can avoid prorating by making the profit sharing plan effective 1/1/2004, although the CODA part would be effective 10/1/2004.

[Guest Ducks]

Thank you much.