Changing from pay-period safe harbor match to annual match

So 2024 has already begun and a plan has a pay-period safe harbor match.  A client advisor is asking if they can amend the plan to an annual match to eliminate the requirement to pay the match quarterly.  (This is not our client and apparently the plan sponsor has been paying the full match after the end of the year.)  I told the advisor, I believe this is a prohibited amendment at this point for 2024 and that they need to begin paying no later than the end of the following qtr.

I expect everyone will say it's a prohibited amendment for 2024 now even though an annual/true up match could effectively increase the match for some.

Tom

I somewhat agree. I think for 2024 they would still have the quarterly deposit requirement on the match for 2024, but that this amendment would not be a cutting anyone's benefit as it's making sure everyone gets the annual safe harbor match so I think the amendment is allowable if they follow the deposit timing requirements of the per payroll match rules.

this is the classic example of what IS allowed for a mid-year change to safe harbor. so much so that the IRS has included it as an example of something that is allowed as a change to SH Match if certain parameters are met, namely:

• change is adopted at least 3 months before the end of the plan year,
• change is made retroactive for the entire plan year, and
• the plan sponsor gives an updated safe harbor notice and election opportunities at least 3 months prior to the end of the plan year.

https://www.irs.gov/retirement-plans/mid-year-changes-to-safe-harbor-401k-plans-and-notices

https://www.irs.gov/pub/irs-drop/n-16-16.pdf