Scrivener's error in safe harbor notice?

[Guest Kelly Igel]

An employer had an existing profit sharing plan, and intended to add 401(k)and safe harbor matching provisions effective 4/1/00 (we have written documentation of this). The document and safe harbor notice (which was timely met, by the way) were prepared specifying a 1/1/2000 effective date (instead of 4/1/2000).

The employer feels that this was a scrivener's error and wishes to base the match on compensation beginning 4/1/00 (rather than 1/1). We feel the employee safe harbor notice must be followed despite the apparent error. Any thoughts on this?

[Alf]

I don't think anyone would argue that the notice somehow amended the plan, so the added (k) feature shouldn't have to be made effective 1/1. The question sounds like whether the plan meets the safe harbor requirements or not. Since there is no guidance on correction for violations of the safe harbor notice rules, you have some flexibility to take a reasonable approach. As far as the safe harbor notice content requirement, I would argue that as long as the safe harbor notice was accurate for the period in which the plan wants to be safe harbor, you met the content requirement. If you sent the notice out during the required period before 4/1/2000, you should be fine on the timing requirement.

From what I have heard, the IRS correction for failing any of the safe harbor rules (including the notice requirement) is to use traditional testing and correction rules, so that is what you are faced with if you decide that the notice requirements were not met.

[rcline46]

Check the 2000 rev notice on this (2000-3??) The notice is correct as written the way I read it.