Converting to a safe harbor mid plan year

[Guest mparker2028]

Client has MPPP. Wants to convert to a safe harbor effective May 15, 2005

(calendar year plan)

Is this allowed?

Do I have a short plan year for 2005 for safe harbor or can I use comp for entire 2005 plan year

[Tom Poje]

the regs only speak of 'adding a safe harbor feature to a pre existing profit sharing plan. 1.401(k)-3(e)(2)

but I imagine the process of converting the money purchase to a profit sharing plan can all be done in one step.

you can only defer on amounts from the start of the 401(k) feature - that has always been the case regardless of whether the plan is safe harbor or not.

when you say use comp fro entire year, for what other purpose?

1.401(k)-3(a)(2) specifically says you can limit comp to period of participation, so I would take that to mean the reverse also holds, you could use full year comp - but at that point I am not sure why you would, when you could make a profit sharing contribution that is subject to vesting in addition to the safe harbor

[Guest mparker2028]

That is exactly my question - can employer make Safe Harbor contributions(3%) and Profit Sharing contributions based on compensation for the entire year?

I will have to distribute 204(h) notice May 1 and amend MPPP formula to 0% effective 5/15/05 (small plan).

Any suggestions on how to structure document,.i.e., effective date of new ps, effective date of cessation of benefit accruals under old mppp?

Thanks Tom