Changing a safe harbor match plan to allow 'true-up of contribution' in current year

[cpc0506]

Hello.

One of your clients just contacted us that they would like to change the safe harbor match language to allow 'true-up' at the end of the year. This would be for 2010. Apparently one of the employees in 2009 (not an owner, but an HCE) made most of his salary deferral payments to the plan in the early part of the year and had his match capped. The safe harbor match is currently deposited on a pay period basis per the document specifications. The employee would have received more match if there was 'true-up' at the end of the year. The current plan document does not 'true-up' the safe harbor match. The plan is a calendar year plan.

Is this something that can be done for a safe harbor plan during the year in question? The client did provide a safe harbor match notice to the employees on a timely basis.

[Tom Poje]

my gut feeling, is that no, you can't change anything in the safe harbor once things are started. based on comments from IRS officials - for better or worse - their hands are tied. the only exceptions permitted were adding a Roth, and if I recall correctly, modifying the hardship rule.

In this particular case, I think you have even more strikes against you. The safe harbor rules already speak of makung a match on a payroll basis and that they have to be in by the end of the nxt quarter. furthermore, you are talking about the hopes of amending a plan to favor an HCE who has the advantage of being able to put in all his deferrals early and getting the advantage of losses....er...gains over the whole year as oppossed to the NHCE.

[MSN]

If you haven't already, make sure the basic plan document doesn't already have this in there. I know we have an optional true up that is hard coded and is not dependent on the allocation period stipulated in the adoption agreement.