Safe Harbor - can we change mid-year to fund match faster?

[masteff]

Hi everyone,

I've been quiet on the site for awhile. Had a job change for the better but have lost time to keep up with the board.

I know that making mid-year changes to a Safe Harbor is tricky stuff so I wanted to run this past the resident experts....

New SH plan started in late 2013, no plan comp in 2013 so first real year was 2014. People before me interpreted the way the adoption agreement was completed as saying the SH match was funded after year end but before filing of tax return. I concur w/ that interpretation.

A management consultant is encouraging us to reduce liability and smooth cash flow by funding SH match more frequently. He first said quarterly until I said pointed out "why not by payperiod?".

So, acknowledging we would still have to do a true up based on our current adoption agreement, can we make a mid-year change to fund SH match on a payperiod basis rather than after year end? Or is that a change that can only be made for a future plan year?

(And yes, we've put the question to our TPA but I felt his first answer was shot from the hip because he thought we were currently funding by payperiod.)

Thanks,

masteff

[david rigby]

A management consultant is encouraging us to reduce liability and smooth cash flow by funding SH match more frequently. He first said quarterly until I said pointed out "why not by payperiod?".

I'm just curious: what is the "reduce liability" portion of this?

[masteff]

I half understand that angle to be more towards company officer and fiduciary liability for the payment to be made at the future date. It may also be to reduce ratios (like liabilities to assets); I've computed a few ratios lately that I haven't seen since textbooks in college.

[rcline46]

Welcome back Masteff. This change is merely one of administrative ease. It is NOT a document change in my world. Just remember the True Up and you are fine.

[Tom Poje]

the sample notice for safe harbor plans provided by the IRS had the following language to be included:

Safe Harbor matching contributions will be based on a ______________________ basis.
(e.g., payroll basis, annual basis, true-up will be made at end of year if you
change election percentage, etc.)

so if your notice had such language and indicated "annual basis" you would be changing something.

arguably that would be a problem. There is still nothing in the regs that talks about issuing a new notice if something is changed.

I realize the whole thing is in many stupid since it doesn't really change anything, but at what point do you draw the line what you can do and cannot do.

...............

I can't say 'it's not a document issue" - since the documents we use (for better or worse) are pretty specific and you have to indicate how often the match is provided, if it is true-upped, etc.

[Kevin C]

There is a difference between how/when the match is determined and when the match is deposited. The match determination should be specified in the document, The deposit timing may or may not be specified in the document. Our VS document gives the employer the discretion to decide when the deposits are made. It also says that if the employer deposits the match on a more frequent basis than is used to determine the match, a true-up is required.

If the document does say that the SH match must be deposited after the end of the plan year, you can't amend that mid-year. I don't remember ever seeing a plan specify that an annually determined match must be deposited after the end of the year.

[masteff]

Thanks! It was helpful knowing what to look for in the various documents just now (safe harbor notice, adoption agreement, VS plan document, SPD, etc.)

I'll wait for the TPA's opinion, but based on what ya'll helped me know to look for, I think we have no problem if we do decide to make the change to payperiod funding of SH match.