Non-ERISA 403(b) to Safe Harbor ERISA 403(b)

[jpokusa]

We have a non-ERISA 403(b) plan that wants to add a match. We would like to add a 4% enhanced safe harbor match, thereby making it subject to ERISA. The question is, can this be done mid-year?

[Flyboyjohn]

I would argue that what you're calling the non-ERISA plan is not a "plan" at all but simply a payroll-deduction & money forwarding accomodation (not being an "employee benefit plan" is what makes it exempt from ERISA).

Now that you're client is prepared to set up an ERISA "plan" I would argue that it qualifies as a new plan and can therefore have safe harbor matching contributions for 2014 (I assume you're not tryiong to go back and match deferrals to the non-ERISA arrangement)

In your 403b plan documents I'd suggest calling this a new plan 001 effective August, 2014

[QDROphile]

While the ERISA side of plan status may be arguable, the tax regulations have no confusion concerning whether or not there is a plan, and there is a plan unless there is some fatal defect under the section 403(b) regulations, such as not having a plan document. While I offer no comment on the safe harbor question directly, I don't think the "new plan" theory is viable no matter how you dress it up with plan numbers.

[Flyboyjohn]

What about adopting a safe harbor 401k, would that eliminate any uncertainty?

[MWeddell]

There's definitely no problem adopting a safe harbor 401(k) plan, assuming of course that there are at least 3 months left in the initial short plan year.