safe harbor maybe

[cpc0506]

A plan provided a safe harbor maybe notice for 2013. Can the plan make changes, such as add a loan provision and addtional hardship withdrawals mid year? The plan document does not currently allow for safe harbor. It would need to be amended by December 1, 2013 if it elects to be save harbor for 2013.

I know that current safe harbor plans do not allow for mid year amendments, but does this follow for safe harbor maybes?

[Lou S.]

I think you can clearly make the amendment because you currently are not a safe harbor plan. The real question is, does making such an amendment automatically have the effect of turning your "maybe" notice into a "no" notice for 2013?

I don't have a good answer to that question but then I've never understood the IRS position on no mid-year amendments to safe harbor plans, particularly when rights are being expanded in some way for participants.

[cpc0506]

Why do you think that making a change to the plan provisions results in 'not safe harbor' for 2013? Is this because you are not allowed to amend a safe harbor plan mid year? The plan is not safe harbor yet.....

[Lou S.]

If you can do what you are suggestioning it would seem to be an end run around the IRS position that safe harbor plans can't be amended mid-year and another argument for always issuing a "maybe" notice over a "yes we are" notice. At least for non-elective safe harbors.

Again like I said in my earlier post I really don't know the answer to your question, but I think it is a very interesting one.

[ETA Consulting LLC]

I think several members (KevinC, not sure if it was M.Preston) have made several comments on this type of issue. When you issue a "maybe" notice, you are still a Safe Harbor Plan in that you actually issued the notice. Now, if you make an amendment to the plan that would change some information in that notice that was issued prior to the beginning of the year, then that would seem to negate the possibility of being safe harbor for that year.

Previous arguments were to what types of amendments are allowed. Some took the position that any amendment could be done while maintaining safe harbor. Some (including myself) argued that very few. My argument, in particular, is that any amendment that would change information that was previously included in the safe harbor notice issued to employees would create an issue.

Not sure if you'd get anything definitive, but you should get extensive insight into what the different arguments are.

Good Luck!

[Kevin C]

There have been several threads discussing mid-year amendments to safe harbor plans. I'm not going to beat that dead horse.

The published guidance is in the 401(k) regs [1.401(k)-3(e)(1)], 401(m) regs [1.401(m)-3(f)(1)] and Announcement 2007-59.

There have been several discussions of the topic at ASPPA conferences. The session referenced the most lately is the IRS DC Q&A session at the 2011 ASPPA annual conference. I suggest that anyone interested should try to get a copy of the recording to see for themselves what was said. The 2012 Q&A session added a few examples of amendments that are ok, but not specifically what you are asking about.

After all that, you'll have to decide which interpretation you think is appropriate.