Safe Harbor Start Up

[cpc0506]

Client signs a document (on 10/26/12) effective 1/1/13. The plan is to provide a safe harbor 3% nonelective. This is a brand new plan. Client comes to us today and says that they will not be able to fund the 3% in 2013 and can they amend the plan to take the safe harbor out.

Client provided the safe harbor notice to partcipants in early November, 2012. Can the plan be amended today effective 1/1/13 with no safe harbor provisions? Is the client obligated to make some contribution for 2013?

[Tom Poje]

well, certainly the regs say the notice must be provided timely so someone could make an infomed decision as to whether to defer or not.

so can you provide a notice with less than 30 days? From the comments I heard (though some accuse me of selected hearing), the answer would generally be yes (facts and circumstances), and its less of a problem with a SHNEC rather than a SHMAC. In fact, in the case of a new plan, the regs even indicate the notice could be provided no later than the date the employee first becomes eligible. so I think you still have some leeway.

Arguably the client could decide not to even have a plan - since it hasn't even started it doesn't exist so I don't see how you could have any funding requirement.

Perhaps instead amend to a 'maybe' safe harbor as a middle ground?