Safe Harbor 401(k) Plan

[mming]

Plan uses the 3% NEC safe harbor design and client wants to terminate plan asap. It seems that this calendar year plan would have to remain in existence until at least 12/31/06 given that IRS Notice 98-52 requires a safe harbor plan year to be 12 months long. Would making the 3% contribution in October based on estimated total 2006 compensations be allowable so that the plan can distribute all benefits by the end of the year? How is this normally done? All help is greatly appreciated.

[Guest Pensions in Paradise]

Why not just terminate the plan effective as of 12/31/2005?

[mming]

There wasn't sufficient time to satisfy the notice requirements when the sponsor first mentioned terminating the plan. My question comes down to what period of compensation must you use to calculate the 3% safe harbor NEC. The sponsor wants to make as small a contribution as possible, so if the plan's terminated 1/31/06, would he only be obligated to deposit 3% of the participants' January compensations?

I have to think there are exceptions to the 12-month rule in Notice 98-52 when a plan is terminating, making it OK to distribute all of the assets mid-year and file a final return for the pye 12/31/06, similar to non-safe harbor plan terminations?