Terminating Safe Harbor After Notice Sent but Before Year Starts

[Guest DuChamp]

Can an employer terminate the non-elective safe harbor portion of its plan (without having to meet the substantial business hardship requirement) if it terminates its safe harbor prior to the start of the plan year, but after the safe harbor notice has been sent?

[Lou S.]

I assume you didn't give out the "maybe" notice?

I don't know if there is anything on directly point (maybe someone who has delt with it will chime in) but it would certainly be an aggresive position to give out a new notice this week and amend out of SHNE for 2013 after handing out a yes notice.

[Tom Poje]

again, since this keeps getting asked

1.401(k)-3(d)(3)Timing requirement

(ii) the timing is deemed satisfied if at least 30 days before beginning of each plan year.

then go back and look at (i) the determination of whether the notice has satisfied the timing requirement is based on facts and circumstances.

so, can you give less notice?

apparently less, it is just you have no guarantee if it is less.

what is the purpose of the notice?

so someone can make an informed decision as to wether to defer or not.

so if the safe harbor is a match and you are now 'removing' it, then it is probably more of a problem than a safe harbor nonelective

if it's a mom and pop shop and you only have to tell 3 people of the change, its probably less of a problem.

if its a larger company (and adding the fact a number of people might be off for Christmas vacation) its probably more of a facts and circumstance problem.

[MWeddell]

I agree with the above. The employer is going to have a much better argument that discontinuing the non-elective safe harbor contribution is permitted now (with a notice rescinding the earlier participant notice) than it will after the plan year has started.