Mid Year Amendment for Safe Harbor Plan

[52626]

The employer maintains a 3% Safe Harbor Plan. Currently distributions are issued the plan year following a one (1) year break in service. SInce this is a daily valued plan, the employer wants to change the payout to immediately followign the date of termination.

Although this change has no impace on the 3% safe harbor contribution, I do not believe any guidance that would allow this mid year amendment.

The employer would need to wait until next year for this change. Amend the document prior to the close of the current year and then effective 1/1/2015 allow for immediate distribution

Do you agree?

[Belgarath]

There are a lot of prior threads on this type of question, and you'll get differing opinions.

If you take your approach, you can't get in trouble - it is safe and unassailable by the IRS.

A lot of people would allow this amendment. I'd probably discuss it with the client first, and see how important it is to them to do it now as opposed to next year, and whether it is worth any risk to them. If by some chance it ever went sour, you can bet they will blame you!

The IRS is frequently pretty reasonable on plan issues, but they are just flat-out ridiculous on this one. I can't help thinking that someone there stands to lose face if they change their stance, and doesn't want to - I can't think of any other reason for their recalcitrance on this whole mess.

[austin3515]

Amen

[52626]

I get blamed enough, so I am pushing the client to wait til next year.

Thanks for the response - that is a double Amen from me

[BG5150]

FWIW, I'd do the amendment as: "as soon as administratively feasible" instead of immediately. Gives some breathing room.

[Kevin C]

The IRS is frequently pretty reasonable on plan issues, but they are just flat-out ridiculous on this one. I can't help thinking that someone there stands to lose face if they change their stance, and doesn't want to - I can't think of any other reason for their recalcitrance on this whole mess.

I think you have it right that someone doesn't want to lose face by changing their stance. But, I'm not convinced that "someone" works for the IRS.