Safe Harbor 401(k) for Calendar Year 1999

[Guest J Samuelson]

Is it possible to amend an existing 401K plan to a safe harbor 401k for the calendar year 1999? The notification to the employees prior to the plan year is impossible. If it makes a difference, the safe harbor match would be greater than the match currently in existence.

[Guest T Hoffman]

Under a special transition rule for 1999, a plan that adopts a safeharbor contribution formula effective before April 1, 1999 has until March 1, 1999 to provide the required notice, so the fact that the notice was not distributed before November 1, 1998 will not be a problem for 1999.

As for retroactive amendments, there are two potential problems. First, you cannot adopt a 401(k) plan or formula retroactively. This won't be a problem in your example. Second, you can not cut-back on a 411(d)(6) protected benefit. Adding or increasing contributions retoactively is ok. Safeharbor matching contributions must be subject to the 401(k) distribution restrictions. Normally you could not amend existing matching contributions (those that relate to Jan-Mar) and add these distribution restrictions. However, Notice 98-52 contains a specific exception that permits these amendments, so if the plan has an existing 401(k) formula, you can still adopt the safeharbors.