Enhanced to Basic Match - Mid Year

[TN CPA]

Hello - A client has a 401k plan with an enhanced safe-harbor match formula.  They have asked to reduce the safe-harbor enchanted match to the basic safe-harbor match for the remainder of the plan year.  (Eliminating SH provisions is a top-heavy issue). With the proper 30 day notice and plan amendment, would this be allowed?

 

 

[Bill Presson]

I don't see how. And, even if they could, how much do they really think they'll save?

[Lou S.]

If you are asking can you do it, the answer is yes.

If you are asking if you are still considered a safe harbor plan for the current year the answer is probably no since you are reducing the safe harbor formula mid year. That would mean ADP/ACP testing and not deemed not-top-heavy exemption.

FWIW I think this should be a case where you are still considered SH for the year but it doesn't seem to fit the black letter of the law.