Safe Harbor or Not? That is the question.

[cpc0506]

We have had a number of clients contact us after receiving their 2011 Safe Harbor Notice and they are telling us that they do not want to be Safe Harbor for 2011 or not sure if they want to be Safe Harbor for 2011. The document is written as safe harbor.

First, does the document need to be amended to remove the safe harbor feature of the plan? Or is it sufficient that the client DOES NOT provide the safe harbor Notice?

Second, can a plan that again has the safe harbor feature written in, give a Safe Harbor Maybe Notice to allow the client time to determine if they can really make a contribution for 2011?

What are your thoughts on this issue?

[Tom Poje]

If the document says the plan is safe harbor, then it is safe harbor, regardles of whether a notice is provided or not. Failure to provide a notice is a failure to follow the terms of the document, which require a notice to be provided. rumor had it theat the new version of EPCRS would even contain an example of how to correct such a failure, but that is only a rumor, as we really won't know until the new EPCRS comes out. hopefully it will.

so, yes, amend the documnet before plan year begins to say it is no longer a safe harbor.

issue a notice by Dec 1 that says it might be safe harbor for 2011.

if they do indeed want to be a safe harbor, then a follow up notice must be issued, and the plan has to be amnded to indicate it will indeed be safe harbor (at least for the 2011 plan year)