Amending to "Safe-Harbor" 401(k)

[SMB]

When must a "traditional" 401(k) plan, with a 10/01-09/30 plan year, have to have been amended to convert to a "safe-harbor" 401(k) for its plan year ending 09/30/00?

Thanks to all respondents!

[Guest Tim Brown]

I have been looking into this some myself. I do not believe that you have to necessarily "amend" the plan. The primary issue is the notification to the employees. There have been a couple of notices issued concerning this and the bottom line is that the employees much be notified "at least 30 but not more than 90 days prior to the beginning of the plan year which will be safe harbor". This would mean that notification to the employees in your case would have to be out prior to August 31, 2000 in order to allow this for the plan year beginning October 1, 2000. Because of the timing of the safe harbor provisions, there were some grandfathered notification periods, but those ended in May of this year. I don't believe there is anything you can do for the plan year ended Sept. 30, 2000 but I would love to hear some other thoughts on it. The timing of the notification to the employees seems to be a confusing topic with everyone I speak to.

[MR]

I think Tim is correct on both points. You do not have to amend the plan, but you do need to post a notice and his dates look right to me. Of course, you'll eventually need to amend the plan to reflect the safe harbor choice, but the notice suffices during the remedial amendment period. If your client missed the August 31st date, you might suggest a short plan year from 10-1 to 12-31 and begin the safe harbor 1-1-01. Just what you need - another calendar year plan, I'm sure.