Safe Harbor Plan Definition of "Compensation"

[Guest IRISH79]

Can the definition of "Compensation" to be used for a plan year be changed mid-year under a safe harbor 401(k) plan?

[Guest fender5150]

A quick answer would be "no"; not easily.

Technically: The definition of Compensation is outlined in the 401k plan document, so the definition can't be changed without changing the plan document.

Changing the plan document is not cheap - in most cases. So such a change would have been contemplated (discussed) and agreed on by the officers of the company - one would think.

And if the plan document is changed, the company is required to provide a new summary plan description to everyone involved.

Bottom line: I wouldn't expect such a change to happen too often.

Are there any specific issues of concern?

[John Feldt ERPA CPC QPA]

I would argue that under the final 401(k) regulations, changes that affect the safe harbor contributions are not permitted after the start of the plan year for 12 months, unless it falls into the exceptions category for an initial plan year, a change in plan year, or a final plan year, or as described in Treasury Regulation 1.401(k)-3(g).

Look at Treasury Regulation 1.401(k)-3(e).