Remove Roth mid-year for SH plan?

[BG5150]

SH plan.  ER wants to remove Roth feature effective 7/1/22.  Calendar year plan.

Can they do that?

[CuseFan]

Not sure, but why? If it's a RK issue they've already had to deal with it. Why not wait and eliminate 1/1/23?

[BG5150]

Who knows.  It was a takeover for us in March and it was added then.  So far, no one has used it.

I would think that it's ok to eliminate since 1) they can still make pre-tax deferrals and 2) no one has used the feature yet.

But just because there's "no harm, no foul," doesn't mean it can be legally done.

[Lou S.]

I don't think it falls under the clearly approved mid-year SF amendments and you'd be safer making the change 1/1.

[FORMER ESQ.]

Because Roth contributions count towards the ADP test, and because this is a SH plan intended to be exempt from ADP testing, I would hesitate to make a change to the Roth feature of the plan mid-year.

[Nate S]

On 6/24/2022 at 4:05 PM, BG5150 said:

Who knows.  It was a takeover for us in March and it was added then.  So far, no one has used it.

Did the sponsor "amend" that provision when he signed the other doc pages and forgot to send you the updated version of that page??

[MWeddell]

On 6/24/2022 at 11:08 AM, BG5150 said:

SH plan.  ER wants to remove Roth feature effective 7/1/22.  Calendar year plan.

Can they do that?

Yes, they can do that.  It is permitted by IRS Notice 2016-16, Section III.C.  It will require that a revised safe harbor notice be distributed because it is changing a plan feature listed in Treas. Reg. Section 1.401(k)-3(d)(2)(ii)(B).