Safe Harbor Amendment

[nancy]

A Safe Harbor 401(k) plan currently has a 3 month eligibility with entry dates of October 1 and April 1 (off calendar plan). The employer would like to amend the entry date to monthly. Would this be acceptable using the rationale of the IRS at the 2012 ASPPA Conference? Or is that rationale only applicable if you have a classifcation of employee that was not previously covered?

[Belgarath]

First, although they are sometimes helpful, you must always remember that IRS comments from the podium are not official guidance.

If you do some searches here, you will find many opinions and threads on timing of safe harbor amendments.

If you want iron-clad, unassailable safety, then you don't do any mid-year amendments other than those that the IRS has OFFICIALLY sanctioned.

Beyond that, in the situation you describe, even though I'm generally pretty conservative on this whole issue, I'd allow it.

[Kevin C]

To me, the situation you describe is comparable to the situation in the Q&A question you are referring to (Q#37 at the 2012 ASPPA annual conference).

[austin3515]

I would love to get my chance to call the press if the IRS challenged an amendment expanding the availability of a 401k plan. I just get giddy at the thought of it

[Tom Poje]

of course, what if the plan had been in existence for a few years, and now all of a sudden they want to expand the coverage to include the owners kids and a couple of executives they just hired. that smells bad.

(That sounds like something Dr. Evil would want to do. Austin Powers has to stand up to that)

[Kevin C]

of course, what if the plan had been in existence for a few years, and now all of a sudden they want to expand the coverage to include the owners kids and a couple of executives they just hired. that smells bad.

(That sounds like something Dr. Evil would want to do. Austin Powers has to stand up to that)

1.401(a)(4)-5(a) still applies if the timing of the amendment has the effect of discriminating significantly in favor of HCEs or former HCEs. Of course, a newly hired non-owner executive would be an NHCE for the year they were hired.