ADP/ACP Safe Harbor Problem

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I have run across a differenty type of situation and would like your input. I have a client that has a prototype document that says they will make a 3% SHNEC for the 2004 plan year. However, the client decided back in November, 2003 that he would issue a safe harbor notice stating that the safe harbor match would be made.

Can the plan be amended this late in the year to change from SHNEC to SHMAC or has the plan lost its safe harbor status for 2004? Will both the match and non-elective contributions have to be made?

[austin3515]

Two conflicting view points:

1) Don't you have until the last day of the Plan Year to retroactively amend?

2) Wouldn't it be a prohibitted cut-back of benefits because the right to the benefit accrued on 1/1/?

Participant communications should be given the heaviest weight in my opinion (and to the best of my knowledge, the courts seem to agree), so I would go with answer #1... It seems that this is nothing more than an administrative oversight. You could take the position that the Plan was amended before year end, as evidenced by the revised notice, and that 401(b) allows you until the end of the year to get the document in line...