Safe Harbor Plan Amendment vs. Resolution

[Spodie]

Inquiring minds have asked me; is it possible to provide a resolution from year to year electing to be a Safe Harbor (match contribution) plan vs. amending the plan each year? We recommend to our clients based on demographics and costs on a year to year basis whether being a Safe Harbor Plan is beneficial. For example; a plan may be a safe harbor for 2010, but not for 2011 and then again for 2012.

My opinion is the Plan would still specify it is a Safe Harbor and doing otherwise would create an operational defect.

Please let me know your opinion.

Thank you!

[Peanut Butter Man]

It depends on how the safe harbor provisions in the plan document are written. I've seen plan documents which say that a resolution must be signed each year stating whether the plan will follow the safe harbor provisions and stating which safe harbor formula will be used. The plan document also specifically states that the resolution will be treated as an amendment.

For other plans where the safe harbor provisions, including which safe harbor formula the plan will use, are hardwired into the plan document, any changes to those safe harbor provisions would need to be done by adopting an amendment.

[Bird]

Semantics. A resolution changing the plan provisions is an amendment.

[K2retire]

Semantics. A resolution changing the plan provisions is an amendment.

Not necessarily. A corporate resolution directing that the plan be amended is not an amendment. An amendment needs to be an agreement between the company sponsoring the plan and the plan trustee.

[Guest Sieve]

I agree with you that a resolution is not necessarily the same as a Plan amendment. But, generally a Plan can be amended without the Trustee's consent as long as the Trustee's duties/obligations are not changed. So, as usual, it depends on what the Plan document says with regard to Trustee consent. (Sometimes the Trustee is asked to sign an amendment, even though the Plan does not require it.)

For example, here's what Corbel's prototype Basic Plan Document says about it:

General rule on Employer amendment.

The Employer shall have the right at any time to amend this Plan subject to the limitations of this Section. However, any amendment that affects the rights, duties or responsibilities of the Trustee (or Insurer) or Administrator may only be made with the Trustee's (or Insurer's) or Administrator's written consent. Any such amendment shall become effective as provided therein upon its execution. The Trustee (or Insurer) shall not be required to execute any such amendment unless the amendment affects the duties of the Trustee (or Insurer) hereunder.