ACP Safe Harbor Match Mid-Year Amendment

[JRN]

ADP safe harbor contribution requirement is being satisfied through the 3% nonelective contribution. Plan also allows for ACP safe harbor match - fixed formula, $1-for-$1 up to first 3%, $.50-on-the-$1 on next 3%. Employer wants to amend the match formula to reduce the formula to just $1-for-$1 up to first 3%. The ACP safe harbor match is subject to a vesting schedule (not 100% vested).

It seems to me that this type of amendment is expressly allows under Treas. Reg. Section 1.401(m)-3(h), which provides that a Section 401(m)(11) safe harbor match may be reduced or amended during the Plan Year.

But, Sal's book states that an ACP safe harbor matching formula may not be modified during the plan year. This just seems to me to be contrary to the express language in the Treas. Reg.

Any thoughts, help on this is appreciated. Thanks.

[Kevin C]

The reg you cited does allow for the mid-year reduction or suspension of an ACP SH match. Without seeing the language in the EOB you are referring to, we can only guess about what Sal says. My guess is that he is saying that to be ACP safe harbor, the match formula can not be modified during the year. One of the conditions for being able to reduce or suspend an ACP SH match mid-year is that the plan amend to have the ACP test apply for the year -3(h)(1)(E).

[austin3515]

A mid year change to the ACP Safe Harbor Match (not the ADP Safe Harbor Match). Well that is interesting because what if it was a discretionary contributions determined separately for each pay-period. Now there is no amendment. If on the contrary it was hard-coded into your document than an amendment would be required, and of course the IRS no-likey amendments to safe harbor plans.

I think most amendments are ok, but this one is a bit too close to the ACTUAL Safe Harbor Plan, so I would not do it. But again if the match was discretionary and calculated/determined each pay-period (and the document specifies each pay-period), then I think you should be ok. Just make sure you SH Notice either didn't mention the match directly, or that you left the door open to changing the match.

[austin3515]

Scratch that... I just read the cited reg - I didn't realize there were parallel regs in 401k and 401m on this topic. Amend away, just make sure you follow all those rules including the ACP test...