Removing Safe Harbor 3% in 2011

[cpc0506]

Hello. We have a client who has asked if he can remove the 2011 Safe Harbor 3%. Has the IRS given approval that this can be done in 2011 like in prior years for financial hardship reasons? Any thoughts?

Thanks

[Guest Sieve]

Those rules are in proposed regulations, so they apply in 2011 just as they applied in 2010 (and, in fact, in the 2nd half of 2009). These proposed regulations can be relied on until the issuance of final regs.

[Guest HoopsForBM]

So let me get this straight.....a plan can immediately cease safe harbor match contributions for 2011 a quarter of the way through the year? Does a plan amendment take care of this?

[Bill Presson]

http://www.irs.gov/pub/irs-tege/se0509.pdf

[cpc0506]

http://www.irs.gov/pub/irs-tege/se0509.pdf

what exactly is meant by:

the §401(a)(17) compensation limits must be prorated (I took this language from the IRS newsletter)?

[QDROphile]

The match essentially has a short plan year. Check the section 401(a) (17) regulations for details on prorating the compensation limit for the short period. It is relevant to match formulas that include some function of compensation, such as a limit on the match to a certain percentage of compensation.