Safe Harbor Method Change

[Guest jimmybeau]

Same owner as my other question wants to switch from the 3% of comp to the match method. Do we need an amendment to change or is it acceptable to do either?

Jimmy

[Tom Poje]

the IRS has made clear in one way shape or form the following:

1. you must follow the terms of the document.

2. the document (not the notice) is the driving device

3. there is nothing to stop you from providing both a safe harbor match and a safe harbor nonelective, but again it is specified in the document.

4. so, if its not in the document, you can't do it. thus, you would need an amendment.

5. if you give out a notice the plan is safe harbor, but the document isn't amended, then you are not following the terms of the document if you provide a safe harbor.

6. there is a timing issue involved in all this. amending the plan to provide a safe harbor match at this date, and then providing a notice might fail the guidelines for being considered a reasonable amount of time to make an informed decision as to whether to defer.

(I have not read your other question - at this point in time, based on limited facts provided, you would have to amend to switch from SHNEC to SHMAC. If its for a plan year begining 1/1/09, the IRS could (and I stress the term 'could') deem it not providing someone a reasonable amount of time to make an informed decision (because a SHNEC you get regardless of whether you defer - there is no timely decision, but a SHMAC makes a difference if you defer) but, the IRS could deem it to be made timely - its hard to say.