Safe Harbor Notice

[Guest Xiomara914]

Does anyone have an updated Safe Harbor Notice?

[namealreadyinuse]

Sample Relius SH Notice

[Dan]

Has the guidance on the new safe harbor notice requirements even been published yet?

[Bird]

I don't think there's any guidance beyond the final 401(k)/(m) regs from late 2004. And no more expected, that I know of...relief from providing all the details was requested but the IRS has made it clear that we have to comply with what it says in the regs.

[Dan]

Here is what I have been reading. It appears from this that the notices will have to change for the post-2007 plan years.

PPA will trigger hundreds of guidance items, mostly from Treasury

The Pension Protection Act of 2006 (PPA; P.L. 109-280) requires government agencies to issue guidance or perform some task in 407 instances, according to a word search of the PPA conducted by W. Thomas Reeder, benefits tax counsel with the Treasury Department. The agencies involved will be very busy in the next year, he told the 40th annual conference of the American Society of Pension Professionals and Actuaries (ASPPA), in Washington, D.C., on October 24, 2006. With more than 300 references made to the Secretary of the Treasury, Mr. Reeder's department faces the most work, followed by 44 references to the Secretary of Labor, 21 references to the Pension Benefit Guaranty Corporation, and various references to other agencies.

According to Mr. Reeder, guidance will be issued in three phases. In the first phase, the Treasury Department hopes to publish guidance by the end of November 2006 on issues such as mortality tables, a unified definition of governmental plan, the annual 401(k) safe harbor notices, and the issues surrounding Subchapter S ESOPs under Code Sec. 409(p).

Reeder indicated that the Safe Harbor 401(k) notice will no longer allow a cross-reference to the vesting and distribution rules contained in the plan's summary plan description (SPD). The vesting and distribution provisions will need to be set forth in the Safe Harbor notice. IRS Notice 2000-3 allowed for a cross-reference to SPD provisions governing the plan's withdrawal and vesting provisions. The final 401(k) regulations do not specifically authorize cross-reference to the SPD discussion of the plan's withdrawal and vesting conditions. However, in Notice 2005-95, the IRS stated that, for plan years beginning after 2007, a Safe Harbor 401(k) plan will not violate the notice requirement of Code Sec. 401(k)(12)(D) merely because the notice cross-references the plan's SPD, in accordance with Notice 2000-3. The IRS has now reversed course. Accordingly, sponsors of a Safe Harbor 401(k) plan will need to modify the Safe Harbor notice to incorporate disclosure of the distribution and vesting conditions.

[Tom Poje]

actually the distribution/vesting was to be in the 2006 notice as well, but the IRS gave a 'free ride' last year mainly because the final regs were issued late enough that no one had time to fix their safe harbor notice.

there was some talk that maybe the distribution/vesting cross reference in the SPD was accidently left out of the final regs, but that was not the case. I personally sat in on a discussion on the issue, the particular IRS agent had thought it might be an oversight so he personally looked into the matter and discovered that this change was intentionally made.

[namealreadyinuse]

Sorry, but I am kind of lost. I thought the more detailed notices were required now for the 2007 year. Is that still the case?

[Bird]

I thought the more detailed notices were required now for the 2007 year. Is that still the case?

Yes. The problem is in this part of the quote from Dan:

However, in Notice 2005-95, the IRS stated that, for plan years beginning after 2007, a Safe Harbor 401(k) plan will not violate the notice requirement of Code Sec. 401(k)(12)(D) merely because the notice cross-references the plan's SPD, in accordance with Notice 2000-3.

The word "after" should be "before." As Tom noted, that was essentially a one-year break on the new, more detailed notice requirements that were supposed to be effective for the 2006 plan year notices, as per the final regs.