Failure to send safe harbor notice prior to beginning of plan year

[Guest pongo]

What's the consequence of failing to send the safe harbor notice prior to the beginning of the plan year? Do you lose the safe harbor for the year and have to test? Thanks.

[Guest fatabbot]

What's the consequence of failing to send the safe harbor notice prior to the beginning of the plan year? Do you lose the safe harbor for the year and have to test? Thanks.

Short answer: Yep, you now have to test.

[Tom Poje]

this depends. if your document contains language for safe harbor, then you have a failure to follow the terms of the document.

The IRS has indicated (at least informally at the ASPPA conference) that the self correction for a SHNEC would be to simply issue the notice and proceed as if the notice had been issued correctly (e.g. no testing etc.) this would make sense as a SHNEC should have little effect on if someone defers. do that and if I recall their quote was something like "and take your chances, but you should be ok"

as for a SHMAC, they offerred no guidelines, and of course with very good reason. A match does have an effect on if someone defers. my guess is you would have to assume all want to receive the maximum match, so make a QNEC to bring everybody up to that level, plus the SHMAC. but that would really be a guess based on how the self correction program works in other places.

[Guest pongo]

Thanks to you both.

[Tom Poje]

just to make sure, though, the IRS comment came informally, it does not necessarily reflect actual guidelines.,But one has to work from something, and I would agree with them, if your document says its safe harbor, then failing to issue a notice is a failure to follow the terms of the document -it shouldn't kick the plan out of safe harbor status.

I know at one time the ERISA Outline Book said you still had to make the safe harbor and do testing as well. I take the IRS comments to mean, no, you make the safe harbor (despite the fact notice was not timely given) and there is no testing.