Safe Harbor "Wait-and-See" Notice

[Jilliandiz]

Can you do a SH Match Wait and See Notice or does it have to be a Safe Harbor Nonelective Minimum 3% contribution for the Wait and See?

Thanks

[austin3515]

Well if it was wait and see, participants could not make an informed decision regarding what level of deferrals would be appropriate.

Is that enough information to answer your question

(okay, it MUST be the nonelective)

[JanetM]

Being safe harbor plan is akin to being dead or pregnant. Either you are or you aren't. You can't wait and see - that is discretionary match or profit sharing not safe harbor.

[Tom Poje]

when in doubt, look at the regs.

actually, we all they can be confusing at times, and simply reading them may not be easy.

perhaps this will help:

you know you are talking about a 401(k) issue so you know you will look under 1.401(k).

these regs are subdivided as follows:

1.401(k)-1 Certain cash or deferred arrangements

1.401(k)-2 ADP test

1.401(k)-3 Safe harbor requirements

1.401(k)-4 SIMPLE 401(k) plan requirements

1.401(k)-5 Special rules for mergers, acquisitions

so, you know you are asking about safe harbor, so that narrows where to look.

now. 1.401(k)-3 is subdivided as follows

1.401(k)-3(a) ADP test safe harbor

1.401(k)-3(b) Safe harbor nonelective contribution requirement

1.401(k)-3© Safe harbor matching contribution requirement

1.401(k)-3(d) Notice requirement

1.401(k)-3(e) Plan Year requirement

1.401(k)-3(f) Plan amendments adopting safe harbor nonelective contributions

1.401(k)-3(g) permissible reduction/suspension of safe harbor match

1.401(k)-3(h) additional rules

of course each of those gets subdivided even further, but if you make yourself a simple chart with the major headings, it might nake finding things easier.

if you weave your way through those, the only place that mentions a 'contingent notice' (wait and see) is 1.401(k)-3(f)(2) which pertains to nonelective contributions only.

[John Feldt ERPA CPC QPA]

Safe Harbor match = No, you cannot do what I call a "maybe" notice. If you want to do a safe harbor match then you must (before the beginning of the plan year) adopt safe harbor match plan provisions and provide the safe harbor match within the required time period (a reasonable period before the beginning of the plan year etc.)

3% Safe Harbor nonelective = Yes, you can give a "maybe" notice, as long as you also (generally):

1. Give a safe harbor notice within the prescribed time before the beginning of the plan year that tells the participants that a safe harbor 3% nonelective

might

be provided for the upcoing plan year

2. Remove the safe harbor provisions from the plan before the beginning of the plan year, and

3. If later you decide to provide the safe harbor 3%, you give a supplemental notice at least 30 days before the last day of the end of the plan year, and

4. The plan adopts the 3% nonelective provisions before the end of the year to bring in the safe harbor provisions for that year

[Guest kplymyer]

I was wondering if I could ask a different question regarding the Wait and See notice. I had an accountant ask me what would happen if the client gave the 30 day notice stating they would not provide the 3% nonelective Safe Harbor for the plan year, then had a terrific final month. Would they be able to fund the 3% Nonelective SH and be deemed to pass ADP? I think they may fund a 3% contribution, providing the document allows for such, but they have already committed themselves to perform the ADP test for the year.

Am I wrong? I have been trying to find something to support my conclusion.

Thanks.

[austin3515]

You can't get much more clear than JFKBC's explanation... Although he didn't mention that this will get you out of the ADP test, in his defense that's the whole point of all of this craziness.

On top of that, Tom Poje gave you the exact cite in the regs!

[John Feldt ERPA CPC QPA]

Oh, smashing, groovy! Thanks Mr. Powers!

[austin3515]

Your English accent needs some fine tuning...

[Tom Poje]

just wait 'til J4FKBC gets audited, and when the IRS asks him why he did he did, he will say

"Austin Powers bloody well told me it was ok."

what are they going to think, even though the advice was correct?

[John Feldt ERPA CPC QPA]

Perhaps something like "Arrgh! As you know, every diabolical scheme I've hatched has been thwarted by Austin Powers."

[austin3515]

I would quote blinky-the-three-eyed-fish for an IRS audit! Didn't you ever read Romeo and Juliet?