Termination of Safe Harbor 401(k)

[k man]

the plan is a safe harbor nonelective plan. is it necessary to give a 30 day notice prior to terminating a safe harbor plan mid year? the regs seem to imply you follow the same rules for terminating a SH match but they are not clear to me.

[Tom Poje]

I'd say the regs don't imply anything (they dont really give guidelines if a SHNEC is involved), but at the 2005 ASPPA Conference the IRS officials said that would be a reasonable practice to follow (Question #12)

[k man]

maybe imply was a poor choice of word but they are silent with respect to nonelective while they are specific with respect to match. in any event thanks for the response. do you have a link to that asppa comment?

[Tom Poje]

sorry, I'm not sure what the link is. maybe someone else can provide

as with any Q and A, the note of caution is that the views reflected by the IRS at the meeting do not necessarily reflect an actual Treasury position.

[Guest Nixdad]

I'd go with the notice even if not required. Additional question: Does the employer have to contribute 3% of comp through the termination date or through the last day of the plan year? I assume that, if the former, the plan is not safe harbor and must test and that, if the latter, the plan is safe harbor and need not test.

[Tom Poje]

yes, that is the same as would apply to the instruction to terminate a safe harbor match.

[k man]

I'd go with the notice even if not required. Additional question: Does the employer have to contribute 3% of comp through the termination date or through the last day of the plan year? I assume that, if the former, the plan is not safe harbor and must test and that, if the latter, the plan is safe harbor and need not test.

i think you contribute up until the term date and test adp/acp. of course the people might not have compensation for the remaining portion of the plan year due to separation from service.

[k man]

does anyone know whether you can just terminate the safe harbor contribution but keep the 401(k) in effect?

[Jim Chad]

From a Corbel seminar in 2004, the book says you cannot exit SHNEC midyear and keep the Plan.

I don't remember anything in the Final 401(k) regs that changed this.