Questions re: 2000-3

[KJohnson]

1) A Plan has decided to use a 3% NEC safe harbor for the first time in 2000. It sent a notice in late November 1999, as previously required, saying that the 3% NEC will be made for 2000. Can it now send the "maybe" notice? If not, those who "missed the boat" would seem to have flexibility for 2000 while others who complied with prior guidance do not.

2) The remedial amendment period aside, it would appear that a Plan still has to be amended prior to the Plan Year for the matching safe harbor. Are there 411(d)(6) implications for the "out" that the Service is giving? Obviously, there is no last day/1000 hour requirement for the safe harbor match and the IRS has previously said you cannot make a "mid-year" amendment after all requirements for a contribution have been met. Should the safe harbor amendment be drafted with the "right" to take away the match during the year?

[Guest mo]

1. I vote yes, although I doubt it is much of an issue for the nonelective safe harbor clients I have. I can't think of any argument as to why it wouldn't be allowed. Do you agree that if you can later "opt out" of the nonelective contribution, the requirement to furnish a notice serves no particular purpose and is kind of stupid?

From a language point of view, I have been trying to incorporate as many of the rules as possible by reference as opposed to a regurgitation of the rules. For example I retained all the testing language and just added language indicating that for any year in which the requirements of a safe harbor method as described in the Code were met, no testing would be required.

2. I think you are obligated to fund the match on the basis of compensation already earned and deferrals already withheld at the effective date of the suspension, which can be prospective only. So I don't think 411(d)(6) should be an issue.

[Guest PTE]

1. As to No. 1, I guess the concern would be that you have already represented to participants that the contribution would be made for the year and now you are changing that absolute promise to a "maybe". Are you inviting litigation if you then don't make the contribution?

2. As to language, I like Mo's idea, but doesn't the Plan specifically have to be amended "to provide" for the safe harbor contribution not just the testing effects of the contribution? Won't you have to have an amendment every year stating that the contribution will be made?

3. On the 411(d)(6) issue, can a money purchase plan with a 5% of comp contibution and a 500 hour of service requirement be amended half way through the year after everyone has satisfied the hours requirement to give the 5% for the first six months but only 2% for the rest of the year? Is there a difference between this and "taking away" the safe harbor match mid-year?

4. Do you think this guidance is a signal that we are "on" for amendments this year and that there will not be another remedial amendment extension?