Safe Harbor amend to exclude HCE

[Guest Peggy806]

I have a plan which gave timely notices that they would contribute the 3% NEC for Safe harbor for 2009. The HCEs have decided that they want to be excluded from getting the safe harbor contribution in 2009. The NHCEs will still be getting this. Can I amend the plan and exclude the HCEs for 2009 or do they have to get the contribution this year and wait until next year (2010) to be excluded? I know we cannot stop the safe harbor contributions, but was wondering about this since it does not discriminate against NHCE.

[Kevin C]

It depends on what the plan document says. If the SH provisions are in the plan document on 1/1/2009, you can not amend the SH provisions during the year. They can make the change for 2010.

1.401(k)-3(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. In addition, except as provided in paragraph (g) of this section, a plan which includes provisions that satisfy the rules of this section will not satisfy the requirements of §1.401(k)-1(b) if it is amended to change such provisions for that plan year. Moreover, if, as described under paragraph (h)(4) of this section, safe harbor matching or nonelective contributions will be made to another plan for a plan year, provisions under that other plan specifying that the safe harbor contributions will be made and providing that the contributions will be QNECs or QMACs must also be adopted before the first day of that plan year.

The same restriction is in 1.401(m)-3(f)(1) for the ACP SH.

If the SH provisions are not in the document on 1/1/2009 because a conditional SH notice was sent, this will be an interesting discussion.