final regs - eliminating 3% safe harbor during the year

[Tom Poje]

according to the preamble that just came out

The final regulations make two changes in response to these concerns about demonstrating compliance with the requirement that the employer incur a substantial business hardship (comparable to a substantial business hardship described in section 412©). First, the requirement has been modified by replacing the standard in the proposed regulations that the employer have a substantial business hardship (as described in section 412©) with a standard that the employer be operating at an economic loss as described in section 412©(2)(A). This new standard eliminates the requirement to determine the health of the industry (as described in section 412©(2)(B) and ©) or whether the reduction or suspension of safe harbor nonelective contributions is needed so that the plan will continue (as described in section 412©(2)(D)). Second, the final regulations permit an employer to reduce or suspend safe harbor nonelective contributions without regard to the financial condition of the employer if notice is provided to participants before the beginning of the plan year which discloses the possibility that the contributions might be reduced or suspended mid-year. The notice must also provide that a supplemental notice will be provided to plan participants if a reduction or suspension does occur and that the reduction or suspension will not apply until at least 30 days after the supplemental notice is provided. These regulations do not alter the existing ability of a safe harbor plan to use a contingent notice (as described in § 1.401(k)-3(f)(2)) before the beginning of the plan year where the contingent notice indicates that the plan may be amended during the plan year to include safe harbor nonelective contributions and that, if the plan is amended, a follow-up notice will be provided.

so I guess I need to add a blurb to the safe harbor notices we are getting ready to send out.

[Bird]

Probably, if you're not using the maybe notice. (Why doesn't/didn't EVERYONE use the maybe notice?!)

[BG5150]

(Why doesn't/didn't EVERYONE use the maybe notice?!)

Because if you don't make the SH most years, you are constantly reminding your employees that you aren't making a contribution.

We might.

Um. Maybe next year?

Nope. Try again.

Oh, so close. But here's another notice.

Uh-uh, not gonna happen. But you never know...

[Bird]

And if you are going to make it, you're going to decide before the beginning of the year? I still don't get it.