401k safe harbor plan amendment logistics

[Gary]

I subscribe to Sungard Corbel and use their plan document admin system.

I created a 401k safe harbor plan.

I chose the option where the client provides the "maybe" notice and the output provided a plan amendment that enables the client to reserve tje right to adopt a plan amendment no later than 30 days prior to the endo fo the plan year to provide the 3% nonelective formula.

However, the Corbel documents did not provide a sample plan amendment to actually adopt the safe harbor provision if they decide to do so late in the plan year.

Am I missing something. Doesn't the plan sponsor need to adopt an actual plan amendment later in year to apply the 3% safe harbor? Or is the supplemental notice sufficient?

Thanks.

[PFranckowiak]

It is my understanding that you need to formally amend the plan at least 30 days prior to the end of the plan year and in addition make sure that you give the participants the notice. You must make sure the amendment is for one year only or you are stuck with the SH contributions for the following year. So do both at once if you want to have SH for 2009 and "maybe" again for 2010. Yes it is a lot of paperwork.

Pat

[Guest Sieve]

Paperwork, indeed!

But here's a paper-saving device that I've encountered. I know of some TPAs who take the position that the second notice, prior to year-end, which indicates that the SHNEC will, in fact, be made, is sufficient on its own to be considered an amendment without preparing a formal SH Plan amendment. Sounds very strange and suspect to me.

Has anyone else heard of that approach?

[BG5150]

I thought if the "maybe" language was written into the plan, you only have to provide the notice and not have to amend the plan each and every year.

I've used Corbel's volume submitter, and with the GUST version, you had to amend every year, because there was no "maybe" language available. But with the new EGTRRA VS, there is the option.

[Gary]

With the implementation of a new plan the Corbel language provided the descriptions of the various safe harbors and then a separate "maybe" amendment that enables sponsor to decide later in the year.

This "maybe" amendment provides an annual option to amend plan prior to 30 days before year end. So if that is a sufficent amendment in it of itself, then perhaps the supplemental notice is all that need be provided near end of each year and no additional amendment need be drafted. Not sure, but one interpretation.

Thanks.

[K2retire]

I thought if the "maybe" language was written into the plan, you only have to provide the notice and not have to amend the plan each and every year.

I've used Corbel's volume submitter, and with the GUST version, you had to amend every year, because there was no "maybe" language available. But with the new EGTRRA VS, there is the option.

That was my understanding as well, although we never use this option so I'm not an expert on it.

[Bird]

An amendment is needed, not just a notice. But it's not such a big deal, is it?

[K2retire]

It could be if the client doesn't want to keep paying a fee for a new amendment each year.

[Bird]

There are "amendments" and there are "amendments." This is easy, boilerplate stuff, included in the cost of running a safe harbor plan the right way, for us.

[Guest Sieve]

Hey . . . I hate to say it, but if a client wants the extra flexibility of a maybe SH plan, and that adds complicating factors to plan administration which the TPA or someone else feels it is necessary to charge for, then that's the price to play the game.

Of course, whether or not to charge is a different issue.