Switching from Safe Harbor Non-elective to Safe Harbor Match?

[Lori H]

a small plan is looking to save the employer cost. Currently satisfy Safe Harbor using the 3% non-elective. It is permissible to amend and notify participants in advance to change to a safe harbor match mid plan year and still satisfy non-discrimination requirements and Top Heavy, yes?

[Bill Presson]

I don't see how.

[Jim Chad]

Neither do I.

[Lori H]

Ok Thank you

[Kevin C]

You can't change mid-year, but there are rules dealing with a short plan year in the safe harbor regs.

[austin3515]

Kevin, interesting... The short plan year regs I think only say "you must be safe harbor fort he next year" and do not specify that it must be the same safe harbor?

That is very very interesting!

[Kevin C]

Austin, I read 1.401(k)-3(e)(3) the same way you do. To have a short SH plan year, you have to be SH for the preceding year , short year and the following year. But, I don't see any requirement that you be the same safe harbor for those years,

[Lori H]

If the Safe Harbor non-elective was rescinded, what was contributed prior to could be used towards Top Heavy minimum?

[Kevin C]

If the non-elective safe harbor is suspended, the employer contributions through the suspension date would count towards the top heavy minimum.

[Kevin C]

If you have access to the IRS DC Q&A handout from the 2012 ASPPA Annual conference, Question 36 deals with amending a SH plan mid-year to have a short plan year.