Safe Harbor Funding requirement for 2022

I just heard from the partners of a plan sponsor that they could barely fund the 3% for 2022 and want to eliminate the 3% safe harbor for 2022.  It is not a "maybe" safe harbor.  Most of our SH plans have the 3% hard-coded in because it is easier to deal with as opposed to an amendment each year.  they are probably stuck for 2022 which is fine.  they then will ask me if they have to fund for themselves - 2 partners in a partnership.  My answer has always been for this situation yes so as to follow the plan document but if they want to take that chance and simply have insufficient funds, they must at least fund for the non-HCEs.  

Any way to get out of the safe harbor for 2022 at this late date?

Tom

One thought I had was to double-check your plan document to see if it has any leeway on the HCEs, like if the plan says the sponsor may make an additional SH for the HCEs up to the same level the NHCEs are getting.

14 hours ago, Tom said:

I just heard from the partners of a plan sponsor that they could barely fund the 3% for 2022 and want to eliminate the 3% safe harbor for 2022.  It is not a "maybe" safe harbor.  Most of our SH plans have the 3% hard-coded in because it is easier to deal with as opposed to an amendment each year.  they are probably stuck for 2022 which is fine.  they then will ask me if they have to fund for themselves - 2 partners in a partnership.  My answer has always been for this situation yes so as to follow the plan document but if they want to take that chance and simply have insufficient funds, they must at least fund for the non-HCEs.  

Any way to get out of the safe harbor for 2022 at this late date?

Tom

First, make sure you eliminate it for 2023 AND let them know if the plan is top heavy and what they need to do to avoid any TH minimum. At this late date, you aren't going to avoid the SH because you have to give 30 days notice and that puts you to the end of the year. Agree with Bri to see if you have leeway. We draft our documents so that the HCE SH is optional. Then start discussing a plan to make the 2022 contribution.