Safe Harbor 401(k) Amendment

[Guest carpen]

It is 1/5/2012 ....... Can an employer amend their Safe Harbor 401(k) plan effective 1/1/2012 to go from a 1 yr plan eligibility to an immediate plan eligibility effective immediately or would they need to wait until the 2013 plan year.

Thanks

[ETA Consulting LLC]

Not retroactively; never retroactively. The more interesting question worth exploring is to amend eligibility to add new employees (let's say) effective February 1, 2012 and then provide the safe harbor notice to the newly eligible employees before February 1st. This would appear to meet the safe harbor notice requirements and wouldn't appear to take anything away that was previously promised.

That may work. But there would be more scrutiny required; as I'm only shooting from the hip.

Good Luck!

[Kevin C]

This is one of those areas where everyone seems to have a different opinion about what the rules are.

The effective date issue has already been discussed. The other issue is how you interpret the mid-year amendment restrictions in 1.401(k)-3(e)(1). I'm of the opinion that it means what it says and the mid-year prohibition only applies to changing provisions that satisfy requirements of 1.401(k)-3 [or 1.401(m)-3 for ACP SH]. I don't see any requirements in either of those reg. sections dealing with eligibilty requirements for deferrals. I've amended SH plans mid-year to liberalize deferral eligibility a couple of times.

If you search for mid-year in the 401(k) section, you will find some prior discussions. You'll find widely varying opinions.