401(k) safe harbor: notice to participants

[Guest Rob]

Clearly, a plan that wishes to satisfy a safe harbor must amend the plan to include a plan provison setting forth the safe harbor the plan intends to use. Does anyone read section 401(k)(12) or Notice 98-52 to require a plan provision stating that participants will be given written notice of their rights and obligations within a reasonable period before the beginning of the plan year?

[Alonzo]

Since 98-52 changes can be made in the remedial amendment period, you certainly don't have to put the notice in the plan language yet.

Generally, if the Code or IRS guidance says that a Plan must "provide" for something, that means you need to have langauge in the Plan document about that requirement. 401(k)(12)(D) doesnt say anything about a Plan "providing". It just says that employees have to be given a notice. I don't have the exact text of 98-52 handy, so I'm not 100% sure whether that guidance uses the magic word.

If you have to make a decision about including language now, I'd leave it out. If you're wrong, the IRS will tell you in a determination letter request. You could have a plan qualification issue if the terms of the Plan require a notice, and the employer forgets to do it.

[Guest Rob]

If its not in the document and the employer forgets to do it, is the only penalty that you have to do the ADP/ACP testing? If it is in the document and the employer doesn't do it, would it become an operational failure that could be self-corrected by giving the notice, rather than doing the testing?

[LCARUSI]

Hi Rob -

I'll toss out an opinion here because no one else has responded.

I would guess it will not be necessary to "hardcode" the annual notice requirement into the Plan document. Other procedural requirements (402(f) rolloverover notice, SPD etc.) do not require plan language.

Anyone else have any thoughts on this?