2009 3% Non-Elective Safe Harbor Contribution

[Guest Mannix]

My client annually deposits their 3.0% non-elective safe harbor contribution mid-year in the following year. Can their Plan be amended prior to November 30th, or December 31st, to be relieved of the requirement of putting in any 2009 safe harbor contribution? Thanx.

[401king]

My client annually deposits their 3.0% non-elective safe harbor contribution mid-year in the following year. Can their Plan be amended prior to November 30th, or December 31st, to be relieved of the requirement of putting in any 2009 safe harbor contribution? Thanx.

It's my understanding that there must be a 30 day notice for suspending safe harbor contributions. Additionally, all contributions would need to be funded through the end of that 30 days. Basically, you're out of luck for 2009.

[K2retire]

But this would be the perfect time to amend to remove it for 2010.

[Tom Poje]

agreed its too late for 2009. plans need to be amended by Dec 31, but any related notices have to be issued 30 days before plan year begin.

you might amend plan to use the 'maybe' option for next year, e.g. issue a notice saying such by Dec 1, amend plan by Dec 31. the client has 12 months from the end of the 2009 year to make the contribution (1.401(k)-3(h)(1)))

(in other words, it works just like a QNEC) hopefully that will be sufficient time for your client.

[MWeddell]

There were some proposed regulations issued in May of this year that would allow the 2009 safe harbor nonelective contribution to be suspended in the middle of a plan year if there is a substantial business hardship. Even with that rule, you still have to give 30 days notice.

There is another rule that allows one to wait until 30 days from the end of the plan year before deciding to fund the 3% SH QNEC but the original participant notice would have had to be worded to take advantage of this "contingent" safe harbor plan design.