Discontinuing a non-elective safe harbor contribution

[Guest Sponias]

I am able to find guidance with respect to reducing or discontinuing a safe harbor match contribution; however, I am having a hard time locating information about discontinuing a 3% non-elective safe harbor contribution. I would assume that the document can be amended to remove the feature and current testing would be required.

Any information you can share on this matter would be appreciated!

[Tom Poje]

I quoted the following from the proposed regs during my talk at the ASPPA Conference. (By the way, the proposed regs are suppose to be final within a month. I don't suspect there will be any major changes to them)

In addition, the plan could have a short plan year if the plan terminates, the employer makes the safe harbor contributions for the short year, employees are provided notice of the change, AND the plan passes the ADP test.

IRS Q and A #17 at the same conference:

If original notice provided was the "maybe we'll' make the 3% contribution" notice, then no amendment is necessary. If the notice provided was the 'fixed 3% contribution', then no amendment to eliminate the 3% contribution is POSSIBLE (barring plan termination). [emphasis NOT MINE in this case]

........

thus, you can not eliminate the SHNEC during the year - unless plan is terminated!!!!!!!!. obviously you can amend and eliminate in future years. since safe harbors are 'deemed' to use current year testing you would be stuck to current year testing under the 5 year rule.