Last Minute 2014 SH Notice Changes

[austin3515]

Apparently the IRS is taking its cue's from HHS, throwing a new rule for 2014 SH Notices that people have been sending out since October 1. Bravo IRS. Bravo.

Thank you for adding a terrific incentive for employers NOT to provide a Safe Harbor Plan to its employees by making the burden for discontinuing a costly and generous benefit so high.

http://www.ferenczypaul.com/Documents/FlashPoint/11_15_13_FlashPoint_.Treasury_and_IRS_Finalize_Rules_on_Suspending_Contributions_to_Safe_Harbor_401k_Planpdf.pdf

[austin3515]

After reading Tom Poje's post from a couple of days ago, it is clear that they actually made things easier. Ilene's article led me astray. See below:

There is one alternative to the "operating at a loss" rule. This requirement does not apply if a notice is given as part of the safe harbor notice at the beginning of the year that is a variation on the "maybe" notice discussed above, which our friend, Derrin Watson, suggests should be called the "Maybe Not" notice. Under this option, the plan that is a documented safe harbor plan as of the beginning of the year would provide as part of its notice (i.e., before the beginning of the plan year) that the plan might be amended to remove the safe harbor during the year.

For the record, I still think the timing is ridiculous..

Thanks,

[Jim Chad]

Austin. I agree. The timing is ridiculous!

[Guest jmherisa]

The timing is really unfortunate for all. Service providers who prepare documents/notices are in the difficult position of deciding whether to revise and resend the 2014 safe harbor notices that have gone out to their clients already. The plan sponsors who already handed the original version out may not want to re-issue it just to add the "maybe not" language that hopefully they will not need anyways.

Overall though, the new rules are an extremely welcome relief. Going forward, as long as the safe harbor notices contain the new language, a sponsor who needs to stop their SH NEC contribution mid year won't have to get the bad news that the only way it can stop is by terminating the plan. Of course it makes sense that they have to fund the contribution accrued through the amendment date and have to deal with ADP/ACP testing. This is one of the most logical and practical things I have seen come out in a while!

[Tom Poje]

the hardest part for me was to fit the blurb on my notice and keep it to 2 pages (1 page in duplex)

(Years ago I created a crystal report to pull the info from Relius (different options appear depending on how I have the plan user fields coded).

we were producing pdfs to send, so it's not bad. yes, it would have been nice if they had released this regulation a few weeks ago, but it sure is nice to have.