Can't afford Safe Harbor Contributions?

[Jilliandiz]

I was just informed that my client cannot afford to pay their Safe Harbor Contribution for the 2003 plan year....all valuations, statements and tax returns have already been completed and filed.

Can anyone advise me as to what their options may be? I am assuming they have to make the 2003 contributions regardless, and then I would just have them amend the plan to make discretionary contributions only from this point forward...any ideas?????

[Guest Pensions in Paradise]

1. The safe harbor contribution will have to be made.

2. The 2003 Form 5500 and the plan sponsor's tax return will have to be amended since the contribution cannot be allocated/deducted for 2003.

3. ADP/ACP tests will have to be run for 2003 since the plan did not meet the safe harbor requirements for 2003.

4. The plan should be amended prospectively to remove the safe harbor provision if the plan sponsor can no longer afford the safe harbor contribution.

[Brian Gallagher]

Can't the plan be amended to offer the "we may may make" version of the SH?

[Tom Poje]

Brian:

It is the notice that says 'maybe'. and that is done before plan year begin.

if the plan goes that route, it must be amended before the end of the year to include safe harbor language (either permamently or just for that plan year), not 'maybe' safe harbor language.

it sounds like it is too late.

The client should have provided the notice with the maybe, just to prevent the problem.

in a similar vein, even though the document contains safe harbor language. if the notice had said 'maybe' the plan could be amended to take the language out.