Failure to make 3% Safe Harbor Contribution

[JRN]

Employer is suffering real financial hardship. They cannot fund the 2013 3% safe harbor contribution. What do we do here? My thinking is that this is an Operational Failure and the Plan should file under EPCRS. Proposed correction would be to retoractively amend the Plan to remove Safe Harbor provisions. I'm questioning whether IRS would approve this proposed correction because this would clearly not put participants "back where they would have been had the operational failure not occurred".

Is there any solution here?

Thanks.

[Lou S.]

Short of declaring bankruptcy?

Hopefully they were maybe for 2014 and said no or amended out of 2014 near the end of 2013 when they realized problems.

It is highly doubtful that the IRS will take a retro elimination of the safe harbor contribution.

Could be time to get an ERISA attorney with a lot of EPCRS experience involved.

[John Feldt ERPA CPC QPA]

I've seen a couple of cases where the bankrupt client wanted to fund the safe harbor for just the NHCEs from the HCE owner balances in the plan. This was submitted to the IRS and clearly explained in the submission and the IRS issued a Determination Letter allowing the action. If they had not accepted that, the other option being considered would have been to allow the HCE owner to distribute their balance, give enough of those proceeds to the employer, then attempt to fund the plan, but all the creditors in line for those funds would have turned that into a problem and the NHCEs in the plan still probably would not have received their 3% SH allocation.