CPA just called and said he wants to add a Safe Harbor Feature to his existing KPlan

[CharlesLeggette]

He says the recently issued modified rules on Safe Harbor permit mid year adoption of a Safe Harbor feature in an existing 401K Plan....is that correct????

[WCC]

No, unless one of the exceptions listed below applies. Notice 2016-16 states this in section II B (copied below). 

Section 1.401(k)-3(e)(1) provides that a plan will fail to satisfy the requirements of §§ 401(k)(12) and 401(k)(13) and § 1.401(k)-3 unless plan provisions that satisfy the safe harbor plan rules of § 1.401(k)-3 are adopted before the first day of the plan year and remain in effect for an entire 12-month plan year. It also provides that a safe harbor plan that includes provisions that satisfy the safe harbor plan rules of § 1.401(k)-3 will not satisfy the nondiscrimination requirements for § 401(k) plans for a plan year if the safe harbor plan is amended to change those provisions during the plan year. Section 1.401(m)-3(f) includes similar provisions for matching safe harbor plans. The safe harbor plan regulations set out several exceptions to the requirement that plan provisions satisfying the rules of §§ 1.401(k)-3 and 1.401(m)-3 be adopted before the first day of the plan year and continue for an entire 12-month plan year. These include exceptions for (i) a short first plan year, (ii) a change in the plan year, (iii) a short final plan year, (iv) a delayed adoption of safe harbor plan nonelective contributions (if notice of this possibility is provided before the beginning of the plan year), and (v) a mid-year reduction or suspension of safe harbor contributions (which results in loss of safe harbor plan status). See §§ 1.401(k)-3(e), (f), and (g) and 1.401(m)-3(f), (g), and (h).1 In addition, exceptions to the prohibition against mid-year amendments may be provided in guidance of general applicability published in the Internal Revenue Bulletin. See §§ 1.401(k)-3(e) and 1.401(m)-3(f).

[austin3515]

Maybe it's time to change the Plan Year to a 3/31 :)  IF that was the case you could add a safe harbor provision 4/1...  That would be item (ii) in the list provided above.