Safe Harbor - no changes allowed, almost

[John Feldt ERPA CPC QPA]

A calendar year Safe Harbor 401(k) plan provides a 3% SH contribution and has a discretionary profit sharing provision.

The client wants to keep the eligibility for deferrals the same. The client wants to keep the eligibility for Safe Harbor contributions the same.

The client wants to change the eligibility for only the Profit Sharing portion (e.g. lower the 1 year requirement to 6 months). They are having a great year and want more NHCEs to receive some of the year's profits via the plan.

I have made the attempt by looking at 1.401(k)-3(e) and its reference to 1.401(k)-1(b).

Is this an allowable change in this plan year, or must the provisions become effective no sooner than the beginning of the next plan year?

If this is not allowable, which section prohibits this change?

What if they want to only change the Entry Dates for only the profit sharing portion, from 2 entry dates per year to 4 entry dates per year, can that be effective during the year?

What if they also want to improve the vesting for the profit sharing portion only (move the schedule to 5-year graded from 6-year graded), can that be effective for this year? This does not affect the HCEs, they are already vested. Please tell me an employer can provide a better vesting schedule?

[Tom Poje]

the IRS has given a nod of approval to some chnages (such as adding a Roth feature) as long as a supplemental notice was issued. I don't recall exactly what the Rev Ruling or Proc was or how the exact wording was.

I would suspect such a change as you indicated would be possible - in fact I am not even sure you would have to issue anything (other than an SMM) as the change has no effect on the safe harbor.