Safe-harbor NEC - redux

[Lou S.]

Yet another question about the safe-harbor non-elective contribution. Clearly at this point owners can't waive for 2008, at least not unde the rules as I understand them so the contribution due for 2008 has to be made, absent backruptcy along with plan termination where the IRS might have some pity for the client. And I think I've found this answer in at lest two threads in my search. You have the dual problems of following written Plan terms and 411 cut back issues.

But can the plan be amended now for 2009 to elimiante the safe-harbor nonelective only for HCEs who are more than 5% owners? That is NHCEs and non-owner-HCEs still get the 3% contribution. Or at worst freeze the 3% contrib for owners through date of amendment but full year 3% for all others? Has anyone seen this before? Probably a better question for the IRS than here but thought I'd try to get some other opinions.

I think the answer is no even though the alternative might be terminating the entire plan which just seems counter to good retirement policy. I know the IRS position is "well you should have done a maybe notice" but it is a bit late for that.

[Jim Chad]

Lou Here is a couple of ideas.

Is the owner(s) over 59 1/2? If yes put the money in for a couple of days and take it out as an in service withdrawal.

Next thought, under 59 1/2 you cannot take out deferrals or SHNECs, is there any money he can take out? Even with the 10% penalty for having put the money in the plan, he is still ahead if you count both halfs of FICA, maybe.

3rd idea terminate the Plan. Can he afford to continue the TPA fees and everything else to do this right for the next few years?

4th idea they have a whole year to pay the owners 3% less comp so they can afford this contrib. IF the 3% pay cut will kill them see idea 3