Increase SH Match

[Guest saotampa]

We have client that wants to increase the safe harbor match effective April 1, 2008. Can we do this as long as we provide a new safe harbor notice. The 2008 notice was provided to the participants in timely fashion. Thanks.

[Tom Poje]

the regs are silent on the issue. it would seem logical if you are improving things rather than taking away you should be able to do something like that. but the key word is 'logical', and you are dealing with IRS so...

why not just make it discretinary match, trued up over the whole year with a cap at 6% deferral up to 4% of comp?

(or didn't the safe harbor notice mention the possibilty of a discretionary match?

[Guest saotampa]

Thanks Tom. The safe harbor match is currently 100% up to 4% of comp and they want to increase it to 100% up to 6%. I thought the same thing that they are improving the match so it isn't hurting anyone and participants can make deferral amount changes on a quarterly basis. They do have a discretionary match in the plan. I'll see how they want to handle the increase. Take care.

[MSN]

The below reg does not differentiate between amendments that increase or decrease the benefits. While I think it should be permitted, it seems that any change in the SH formula after the start of the plan year will have the potential for adverse consequences.

§1.401(k)-3 Safe harbor requirements.

(e) Plan year requirement (1) General rule. Except as provided in this paragraph (e) or in paragraph (f) of this section, a plan will fail to satisfy the requirements of section 401(k)(12) and this section unless plan provisions that satisfy the rules of this section are adopted before the first day of the plan year and remain in effect for an entire 12-month plan year.