Reduce Safe Harbor Match from 6% to 4%

[Guest TimS]

A new client has apparently provided a timely 2009 safe harbor notice (plan year-end is Dec 31) which states that the safe harbor match for 2009 will be $1 per $1 up to 6% of comp. The client is now interested in reducing the safe harbor match mid-year to $1 per $1 up to 4%. If the safe harbor match is lowered for the last six months would the plan still maintain safe harbor status for the full calendar year and, if so, what notice requirements might be required?

Thanks.

[austin3515]

Believe it or not the answer is no. Absolutely no distinction is made between a reduction or a suspension. They both blow the safe harbor.

[MWeddell]

I agree with the above answer. It makes no policy sense, but that's the answer I get looking at the regulations too.

The fix (if one had considered this possibility last November assuming one is working with a calendar plan year) is to have the safe harbor notice provide for 100% match on the first 4% of pay deferred and that a discretionary match, expected to be 100% on the next 2%, may be allocated, which would bring to total to 100% on the first 6%.

[Guest TimS]

Thanks for your replies. We suspected same but just wanted another opinion.