Mid Year SH QNEC

[AJ North]

I have an existing 401(k) plan with a calendar plan year that wants to add a SH provision mid-year. I believe that this is may be possible if the plan sponsor adopts a "wait and see" SH QNEC provision and provides the appropriate notices. Also the plan must use current year method and execute the appropriate plan amendments. Is my understanding correct or not correct?

[QNPG]

I have an existing 401(k) plan with a calendar plan year that wants to add a SH provision mid-year. I believe that this is may be possible if the plan sponsor adopts a "wait and see" SH QNEC provision and provides the appropriate notices. Also the plan must use current year method and execute the appropriate plan amendments. Is my understanding correct or not correct?

A plan may add a safe harbor feature to an existing 401k plan as of the first day the Plan Year - not mid-year. Thereafter, the employer can wait until 30 days before the end of the succeeding plan years to decide whether or not to make a safe harbor non-elective contribution, if the following notice requirements have been met: 1) employees receive notice within reasonable period before the beginning of the plan year of the possibility of a safe harbor contribution, and 2) a second notice is provided at least 30 days before the end of the plan year that the employer has decided to make or not make the safe harbor non-elective contribution.

If the plan is using prior year testing, the plan document should be amended to reflect current year testing in years that the ADP/ACP safe harbor is not utilized. This should also happen prior to the year in which it is effective and can be the same amendment.

[austin3515]

One possible work around is to amend the plan year such that a short plan year ends, say June 30, and a new 12 month plan year beginning July 1.

[AJ North]

Thanks to all who responded.