Safe Harbor Match

[Guest moltengater]

A plan is designed as a safe harbor basic match plan, whereby the employer is to deposit the safe harbor match on a pay period basis. However, the employer has failed to deposit the safe harbor match on a pay period basis in 2005. What are the consequences of not depositing the safe harbor contributions by the end of the quarter following the quarter in which the 401(k) was depsoited?

1. Does the employer have to allocate the safe harbor match based on the full year compensation?

2. Does the employer have to deposit lost earnings and pay an excise tax?

3. Does the employer lose the safe harbor protection and have to perform ADP / ACP testing on the plan?

The same employer sent out the 2006 safe harbor notice to its employees and the notice states the safe harbor would be deposited into the plan on a pay period basis. Can the employer amend the plan to remove the pay period provision and issue a revised safe harbor notice to the employees - or are they stuck with the safe harbor match done on a pay period basis?

[Tom Poje]

my suspicions would be you have a 'failure to follow the terms of the document'. thus, plan is still safe harbor. following similar guidelines under self correction I would guess you would put in the match with additional earnings.

I've never seen the issue addressed in which you would issue a new notice to amend the plan from payroll to ytd or whatever, so I would guess that would be frowned upon.

all of the above is only my best guestimate based on anything else I have heard/read/etc