Mid-year conversion SH Match to SH Non-elective

The question has come up whether a plan currently using a safe harbor match can mid-year amend the plan to provide for a 4% safe harbor non-elective contribution. The request is prompted by the sponsor considering adding a DB plan for the current year realizing that the non-elective form of SH would be a better fit for a combo plan.

Notices 2016-16 and 2020-86 don't seem to address this specific situation. I think it should be allowed. Any other thoughts?

I would respectfully disagree. See the following PROHIBITED change, copied from IRS Notice 2016-16.

3. A mid-year change to the type of safe harbor plan, for example, a change from a traditional § 401(k) safe harbor plan to a QACA § 401(k) safe harbor plan.

You can't change the TYPE of safe harbor plan mid-year, even though certain formula changes can be made.

That was my stumbling block. I read that clause as changing the larger paradigm, not the formula. It's still not clear, but if I can stop a match mid-year and adopt a non-elective mid-year, shouldn't it follow that I can do them back-to-back?

No. At least IMHO. Maybe others will chime in here.

48 minutes ago, Dalai Pookah said:

if I can stop a match mid-year and adopt a non-elective mid-year, shouldn't it follow that I can do them back-to-back?

It would - at worst you could do the amendment to suspend the match on one day and then adopt the 4% non-elective the next day - but can you really do that?

Notice 2020-86 Q&A-8 says you can suspend a plan's safe harbor nonelective contributions during the year, later readopt the 4% nonelective, and still retain the safe harbor. It doesn't say anything about suspending a match and being eligible for this treatment. Given that the IRS chose to specify nonelective in this Q&A - combined with the section of 2016-16 that Belgarath referenced - it seems that you can not get this treatment with a safe harbor match.

Suspend the safe harbor match & let the ADP testing fall where it may.(keep deferrals maxed tho)  If considering a DB combo, presumably the tax-advantaged contribution is a driving factor?  Consider using a prior service formula to help drive up the first year maximum, but I'm also guessing that the maximum is more than enough to make up an additional $26k...