Safe Harbor Plan Amendment

[buckaroo]

Client currently has a S-H 401(k) plan utilizing the standard match contribution. They want to change to the 3% SHNEC.

When does the plan have to be amended by? 12/01 or 12/31? Or another date?

I woulde think it is 12/31/2006 and the notice is independant.

[stephen]

I think the notice should be provided at least 30 days prior to the beginning of the plan year and the notice should reflect the 3% non-elective. The amendment would bneed to be signed by 12/31/2006 to be effective 1/1/07.

[Randy Watson]

Providing notice 30 days prior is deemed to be reasonable, but 30 days is not required. I don't believe the timing of the notice is as critical with NECs as it is with matching contributions since the participant is going to get the NEC regardless of whether they decide to make deferrals. In other words, there is little the participant needs to consider with regard to the NEC so something less than 30 days may be reasonable.

[stephen]

What about participants who were deferring 5% so they received the full match? I think they should be given ample notice so they could reduce their deferral amount if they choose to do so as they will get the 3% NEC regardless.