Mid-year safe harbor 401(k) change

[Guest Rae]

One of our clients maintains a money purchase plan and a safe harbor 401(k) plan that provides that the 3% nonelective contribution will be made to the money purchase plan. The 3% nonelective contribution is currently the only contribution going into the money purchase plan.

They would like to merge these plans in the near future, rather than wait until the end of the plan year (December year-end). They still intend to make the 3% nonelective contribution, but this contribution would now be made to the 401(k) plan instead of the money purchase plan. However, the safe harbor notice states that the contribution will be made to the money purchase plan.

Would this change violate the safe harbor rules since we're changing the plan that was identified in the notice? I haven't seen this addressed anywhere else.

[Bird]

I think it's OK; a merger is really a continuation of both plans as one after the point of merger. I'd issue a revised safe harbor notice to be on the safe side, and of course you want to make sure that exactly the same people get exactly the same contributions they would have otherwise received.

Having said that, I'd push hard(er) to merge as of 12/31. It's a LOT easier (at least the way we run our typical plan).