Start new safe harbor plan now

[Richard Anderson]

Can an employer start a new 401(k) plan now, and give safe harbor notice at the same time

that the plan is effective?

The employer previously had a 401(k) plan that was terminated in 2009 or 2010. Employer

has not had a pension plan in effect between the termination of the prior 401(k) plan and now.

They want to start a new 401(k) before the end of this year and to have safe harbor matching

for the short plan year (from now until 12/31/2012).

Is the old 401(k) plan that terminated in 2009 or 2010 considered at all in determining when the

"new" safe harbor 401(k) plan can be established and when employees must be given notice?

[Tom Poje]

have the people been paid out?

without looking it up, I thought there is a succesor plan rule (e.g. if they were only paid out < 1 year ago then I believe the answer is no) As I recall it's based on pay out date not term date.

[401king]

It must be at least 12 months from the date the assets were completely distributed from the previous plan. I think the only other catch is that the plan year for a Safe Harbor Plan must be 12 months. So, you could not do a short plan year for the initial year of the new SH plan. Easy fix is to have the plan year be 01/01/2012 - 12/31/2012 -- but based on what you said it sounds like they may think they're signing up for a short plan year. If you want to go 01/01 - 12/31 you must be sure the assets were distributed from the previous plan by 12/31/2010.

So you're looking at two 12-month rules: 1) 12 months from the distribution of previous assets; 2) new plan year cannot be a short plan year.

edit: Way off on 12-month requirement for new plan. Got mixed up with removing a safe harbor mid-year by doing a short plan year (which does not work).

[Tom Poje]

I thought the new plan rule was it had to be at least 3 months long.

[Richard Anderson]

Everyone was paid out by the end of 2010.

[PensionPro]

It is considered a new plan since it is not a successor plan. A newly established plan (other than a successor plan within the meaning of §1.401(k)–2©(2)(iii)) will not be treated as violating the requirements of this paragraph (e) merely because the plan year is less than 12 months, provided that the plan year is at least 3 months long.