Switching to a S/H Plan before start of Plan Year

[rblum50]

I have an 8/31 client with a simple 401(k) plan. Currently, the only contributions being made are employee salary deferrals and employer matches. They have decided to switch their Plan Year to calendar year. At this point, they would also like to consider adding a Safe Harbor match to the Plan in place of the current match for the Plan Year beginning January 1, 2014. I don't think that it is too late to prepare a S/H notice to be distributed to the employees informing them of this for 2014. Any problem with adding the S/H matching contribution?

[Lou S.]

Do you mean simple 401(k) as in easy or simple as in SIMPLE?

I don't know much about SIMPLE 401(k) Plans but unless there is a prohibition on short PY in a SIMPLE you should be good to go. If you meant easy and not SIMPLE, then you are good to go with short PYE.

[rblum50]

I'm sorry, I should have been more precise. A "simple" 401(k) as in plain vanilla. The only contributions made to this plan have been employee salary deferrals and employer matches.

[austin3515]

I have set up non-calendar year plans for the sole purpose of getting around the "stub" period in the 4th quarter. What you're doing is basically the same thing, even if your objective really was just to switch to a calendar year. Whether by sheer coincidence or good plan design consultation, it is legal either way.