Safe Harbor Plan Amendment

[perkinsran]

Paychex is telling one of their clients they cannot modify a safe harbor plan to add auto enrollment until next year. Any truth to that?

[Lou S.]

Yes. I don't think auto-enrollment is one of the IRS pre-approved mid year amendments to SH plans. Though it probably should be.

[Kevin C]

There is no such thing as an IRS pre-approved mid-year safe harbor plan amendment list. The prohibition on certain types of mid-year amendments to safe harbor plans is in 1.401(k)-3(e)(1) and 1.401(m)-3(f)(1)

If you are talking about a QACA, as much as it pains me to say it, I would agree with Paychex. If you are talking about an EACA or an ACA, the answer might be different.

[perkinsran]

The client was looking at an ACA.

[K2retire]

Whether or not an amendment not specifically permitted by the IRS can be made mid-year, is the subject of ongoing industry debate. Because it is controversial, some service providers won't do it as a matter of policy.

[Bill Presson]

Yeah. I've got an attorney that won't even allow their client to amend from balance forward to daily valuation because it's safe harbor.

Sigh.

[Kevin C]

"Industry debate" is a good term for it. The "no amendments at all" side are holding fast to their stand, but their numbers are declining. Hopefully, we can keep the "it's only allowed if it is specifically permitted" view from becoming "industry debate" in other areas.

1.401(k)-3(j)(1)(iii) has a definition of ACA that is used as part of the QACA definition. But, I don't see any rules in 1.401(k)-3 that a plain ACA must satisfy, so I don't see that the -3(e)(1) mid-year prohibition applies to an ACA. If the published guidance doesn't prohibit it, then it becomes a matter of opinion whether you can amend and the answer is determined by where you stand in the debate.

Bill, keep your fingers crossed that none of your clients die or sell their companies mid-year.