Safe Harbor Plan - Mid-Year Formula Change and Automatic Enrollment

We have a Safe Harbor 401(k) plan that has a basic match formula (100% on the first 3% and 50% on the next 2%).

They would like to add the automatic contribution arrangement that would be a flat 4%. Can a Safe Harbor plan add ACA (not EACA or QACA) at 4%? 

Also, can they change the formula to 100% match on the first 4% instead of the current formula? Based on what I found here: https://www.irs.gov/retirement-plans/mid-year-changes-to-safe-harbor-401k-plans-and-notices, it looks like it's permissible assuming it applies to the entire year.

In this case, I believe we will need to do 2 amendments. One amendment would amend the Safe Harbor formula effective 1/1/2024. The second amendment would amend the plan to flat 4% ACA, effective now. I would think that we can't combine these amendments in one, since the effective date for the Safe Harbor formula change has to be 1/1/2024, but the ACA feature was not available for the entire year, so it can't have an effective date of 1/1/2024. Would you agree?

Thanks!

You can’t retroactively amend a SH match formula. I would do the amendment for both items effective 1/1/25.

Bill,

Thank you for your response.

In the IRS link in my original post, there is the following quote:

"However, a plan isn’t limited if the:
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."

Based on that link, it seems like retroactive amendment to the match formula is possible. Would you agree?

The following link (https://www.irs.gov/pub/irs-drop/n-16-16.pdf) also has Example 3 on page 7 that shows that increasing the Safe Match is permissible retroactively.

In my case, the Safe Harbor Match is not increased (it's still 4% total), but the formula is more favorable.

Thanks.

The additional question is... can an ACA arrangement be added to a Safe Harbor Plan mid-year?

8 minutes ago, Vlad401k said:

Bill,

 

Thank you for your response.

 

In the IRS link in my original post, there is the following quote:

 

"However, a plan isn’t limited if the:
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."

 

Based on that link, it seems like retroactive amendment to the match formula is possible. Would you agree?

 

The following link (https://www.irs.gov/pub/irs-drop/n-16-16.pdf) also has Example 3 on page 7 that shows that increasing the Safe Match is permissible retroactively.

 

In my case, the Safe Harbor Match is not increased (it's still 4% total), but the formula is more favorable.

 

Thanks.

I see that now, but I've got to process that. I may stand corrected.