changed mind on Safe Harbor

[Guest JBarid]

My client sent out a notice in November 2006 for a Safe Harbor Basic Match in 2007. A week ago, he changed his mind and now wants to just do a regular profit sharing contribution.

My question is, what type of amendments/notices should I prepare for him?

I am guessing the partiicpants need a 30 day notice. But during that 30 days is the plan still considered Safe harbor? Even though the company has made no match yet this year?

Thank you for your responses!

[Guest Tbrown]

If I understand the issue properly, the client does need to give the participants a 30 day notice that the match will cease, they must match up through the date declared on the 30 day notice (presumably 30 days from the date of the notice) and the plan must be tested for non-discrimination for the entire year. I believe that you also will need to give the participants the option to stop their 401(k) contributions even though they normally may only be able to do that quarterly.

Tim

[Leopurrd]

I'm assuming the document was amended in 2006 to include the SH match in 2007 - if so, removing the match will also require an amendment to the plan.

Don't forget that testing must be ran on current year method.