Safe Harbor Notice- SECURE ACT

[Megan H]

I have been reading summaries of SECURE published by various sources, but one I came across recently said something I had not seen before regarding the elimination of the safe harbor notice requirement for nonelective safe harbor plans:

 nonelective contribution safe harbor plans that have matching contributions intended to fall within the ACP safe harbor must still give notice.

This would mean that even if a plan is utilizing a safe harbor nonelective contribution for the year, if you are providing a discretionary matching contribution as well, the notice is still required each year?

The reasoning is that Code Section 401(m)(11) was not amended by SECURE Act. Code Section 401(m)(11) defines the ACP test safe harbor and says the plan must meet the contribution requirements of 401(k)(12)(B) (match) or (C) and meet the notice requirements of 401(k)(12)(D). 

Again, this is the first time I saw someone point this out so I am curious if this is everyone's understanding as well. Thanks!

[Larry Starr]

2 hours ago, Megan H said:

I have been reading summaries of SECURE published by various sources, but one I came across recently said something I had not seen before regarding the elimination of the safe harbor notice requirement for nonelective safe harbor plans:

 nonelective contribution safe harbor plans that have matching contributions intended to fall within the ACP safe harbor must still give notice.

This would mean that even if a plan is utilizing a safe harbor nonelective contribution for the year, if you are providing a discretionary matching contribution as well, the notice is still required each year?

The reasoning is that Code Section 401(m)(11) was not amended by SECURE Act. Code Section 401(m)(11) defines the ACP test safe harbor and says the plan must meet the contribution requirements of 401(k)(12)(B) (match) or (C) and meet the notice requirements of 401(k)(12)(D). 

Again, this is the first time I saw someone point this out so I am curious if this is everyone's understanding as well. Thanks!

That is correct. Here is a slide from Derrin and Ilene's presentation the other day:

[AKconsult]

Another question on the SH NEC notice which came up in our office today is that you may recall several years ago, we all amended the Notice language to provide for the possibility of a mid-year reduction or suspension of the safe harbor contribution.

Notwithstanding any language in this Notice to the contrary, we reserve the right to amend the Plan at any time during the Plan
Year to reduce or suspend the safe harbor contribution. If we decide to reduce or suspend the safe harbor contribution, we will
provide you with a supplemental notice at least 30 days prior to the effective date of such reduction or suspension describing
the consequences of the amendment. Any amendment to reduce or suspend safe harbor contributions will not affect any
contributions earned prior to the effective date of such amendment.

Some people referred to this as the "maybe not" language.  It allows an employer to reduce or suspend contributions regardless of whether they are operating at an economic loss for the plan year.  Without this language, a plan may NOT reduce or suspend the safe harbor contribution, unless they are operating at an economic loss.

If we are no longer providing a safe harbor nonelective notice (ie, the employees are not given the above language) has the employer lost the ability to reduce/suspend the contribution mid-year without a business reason?  I  haven't heard anyone address this...

 

[RatherBeGolfing]

2 hours ago, AKconsult said:

If we are no longer providing a safe harbor nonelective notice (ie, the employees are not given the above language) has the employer lost the ability to reduce/suspend the contribution mid-year without a business reason?  I  haven't heard anyone address this...

Yes.  Its one of the issues that has been identified as needing further guidance.  

[AKconsult]

Thanks!