Notice Requirements for Additional Benefits in Safe Harbor Plan

[Guest W Waldan Lloyd]

Suppose an employer has a basic safe harbor plan (graded match up to 4% for 5% deferral), but also does auto increases up to 5%. Employer has given a conforming and timely safe harbor notice for the 2010 plan year, but has now decided to add auto-increases to 6% and 7% for NHCEs only with a corresponding additional .5% match for each 1% increment above 5%. The employer would like to start this effective Jan-1-2010. Of course, the safe harbor notice already given did not mention this additional match.

If the employer gives a new notice now and amends the plan before year end, will the safe harbor status of the plan be affected? Seems to me the regs only deal with timely notice needed to validate a safe harbor formula, not an additional benefit. Since the new match and auto-increase are in excess of what is required for safe harbor and will be available only to NHCEs, couldn't the employer adopt this change and give notice at any time? On the other hand, the reg requires the notice to describe "any other contributions under the plan . . . and the conditions under which such contributions are made." Would amending the plan now invalidate the prior notice and prevent the employer from providing the additional auto-increase and match? What if the increase were made available at employee election, instead of under an auto-increase arrangement?