Mid year amendment to safe harbor

[Bird]

I'm surprised this hasn't been brought up...if we have a safe harbor non-elective plan, which does not exclude HCEs from the SH, can we amend it to exclude HCEs at the time we say "definitely" later in the year?

Or maybe we always could...? Because we are actually amending the plan to provide the SH? Raises the Q of whether the original "maybe" notice said "...we might make a 3% contribution for all participants..." or whether it dropped the word "all."

[Lou S.]

I believe you are correct, that is the wording of the "Maybe Notice" might be very important whether or not you can exclude HCEs from the safe harbor contribution.

[John Feldt ERPA CPC QPA]

IRS Notice 2016-16 lists as one of the 4 prohibited mid-year changes:

2. A mid-year change to reduce the number or otherwise narrow the group of employees eligible to receive safe harbor contributions. This prohibition does not apply to an otherwise permissible change under eligibility service crediting rules or entry date rules made with respect to employees who are not already eligible (as of the date the change is either made effective or is adopted) to receive safe harbor contributions under the plan.

Would an amendment to exclude HCEs mid-year run afoul of the above prohibition?

[Bird]

IRS Notice 2016-16 lists as one of the 4 prohibited mid-year changes:

2. A mid-year change to reduce the number or otherwise narrow the group of employees eligible to receive safe harbor contributions. This prohibition does not apply to an otherwise permissible change under eligibility service crediting rules or entry date rules made with respect to employees who are not already eligible (as of the date the change is either made effective or is adopted) to receive safe harbor contributions under the plan.

Would an amendment to exclude HCEs mid-year run afoul of the above prohibition?

There's the rub - nobody is getting it until we say they are by literally amending the plan to say so in November.

[Mike Preston]

I vote that you can't do it, but I wouldn't resign from a case where the client decided to go ahead as long as the client was getting advice on the issue from ERISA counsel.