non-elective safe harbor contribution

[thepensionmaven]

We handle a safe harbor 401(K) with the non-elective contribution. The principals have not deferred any amounts and probably will not for 2004.

There are 4 other participants, all NHCEs but only one is deferring salary.

Client does not want to make any contribution if he does not have to.

Under what circumstances is the client NOT obligated to make a 3% contribution.

Thanks,

Steve

[JanetM]

None. If client opted for and notified the employees that there would be 3% contribution he has not choice.

[Bird]

Under what circumstances is the client NOT obligated to make a 3% contribution.

If the plan is written to permit the use of what we call a "maybe" notice ("we might make a 3% SH contribution next year") and the notice was issued 30 days before the beginning of this year, and

the client now (before Dec 1) issues a notice saying "we are NOT making a 3% contribution," and

depending on how the plan is written, they adopt some documentation, such as a resolution, that effectively amends the plan.

Not all plans are written to provide this flexibility; that is, the SH contribution is hard-wired in and you can only change it by amendment before the beginning of the year to which it applies.