401(k) Safe Harbor Plan and Participating Employer

[LMOC]

I know there are only a few reasons a Safe Harbor Plan can be amended mid year. But, could an amendment to remove a Participating Employer who has closed the company be made mid year?

[LMOC]

Any thoughts?

[Jim Chad]

I am trying to think of what harm would be done to play it safe and amend them out of the Plan first of next year. I can't see any authorization to make this amendment and I don't see any harm in waiting.

[Kevin C]

My first thought is that you should read 1.401(k)-3(e)(1) and 1.401(m)-3(f)(1) for the rules prohibiting certain mid-year amendments to safe harbor plans. It's not an easy read, but once you put the pieces together, you may find that what you "know" doesn't match what the guidance says.

My second thought is that with the company already being closed, does the timing of the amendment really affect anything? If anyone from that company were still employed, there are rules for suspending the SH contribution mid-year that would need to be followed.

[LMOC]

Thanks! On that topic, there are no longer any employees for that entity. I agree I didn't see any harm in waiting either. We did get a confirnation from the ERISA support for the Recordkeeper that he would do it. He didn't see any issues with it.

On a second topic for Safe Harbor. Am I correct in a safe harbor plan can no longer be amended mid year to add In Plan Roth Conversions?

Thanks,

[Kevin C]

From Notice 2013-74, Q&A 5:

(b) Section 401(k) safe harbor plans. Under §1.401(k)-3(e)(1), sponsors of §401(k) safe harbor plans described in §401(k)(12) or (13) are prohibited from making mid-year changes to plan provisions that satisfy §1.401(k)-3 except as provided in §1.401(k)-3(g) (relating to certain reductions or suspensions of safe harbor contributions) or in guidance of general applicability published in the Internal Revenue Bulletin. For purposes of the preceding sentence, a “mid-year change” is a change made after the beginning of a plan year that is effective during that plan year.

In accordance with §1.401(k)-3(e)(1), this notice provides a temporary period during which sponsors of safe harbor plans are permitted to make a mid-year change to provide for in-plan Roth rollovers of otherwise nondistributable amounts. The period ends December 31, 2014. Thus, in the case of a §401(k) safe harbor plan that has a calendar-year plan year, in order for the plan to permit an in-plan Roth rollover of an otherwise nondistributable amount during 2013 or 2014, a plan amendment providing for that option must be adopted by December 31, 2014.

They don't say which provisions satisfying the rules of 1.401(k)-3 they think the in-plan Roth amendment would change. Personally, I think they are stretching things in reaching this conclusion. But, it is published IRS guidance saying that they consider an in-plan Roth conversion amendment for a SH 401(k) to be prohibited mid-year after 12/31/2014. So, yes, I would say the Roth conversion amendment needs to be adopted before the beginning of next year and be effective on the first day of next year.

[LMOC]

Thanks everyone!!