Safe Harbor Nonelective mid year change to comp definition

So, you have a SH nonelective 3%. Client wants to amend plan mid-year to exclude certain compensation categories.

1. Can this be done, with appropriate advance notice of 30-90 days? I've heard varying arguments on this. Some yes, some no.

2. If yes, I presume you would credit the 3% on this comp through the effective date of the amendment. Although for the non-SH contributions, such as PS, if they have a last day/1,000 hour requirement, could use the reduced comp for the whole year for that portion.

i have a hard time believing that would be ok with respect to the SH contributions as it directly affects them, and that is what IRS wants to prohibit. i don't see an issue if the comp def was changed just for the PS, as it's these non-SH provision amendments they've softened up to.

well, I would say if you start excluding some comp, then you have, in effect, while you haven't suspended it, you have reduced the safe harbor during the year. The IRS has the following comments in regards to that:

Some changes, such as reduction or suspension of safe harbor contributions, adding or dropping safe harbor status, or changes in plan years, are permitted only as described in existing regulations

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

I agree with Tom that it would be considered a reduction in the SH contribution. If they do it mid-year, they need to comply with 1.401(k)-3(g). Is it worth losing the SH over?

Thank you. You've confirmed that (in this one instance) I'm not crazy!

on the other hand

I know I am crazy, so you have to be careful about any comments I make.

...

the best bit of insanity -( or at least proof of it according to the rest of my coworkers) is a custom Relius report I wrote  that includes a random message from a cow

A MOOving response which is UDDERLY ridiculous. You are MILKING this situation for all it is worth. Although your knowledge puts you in the CREAM of the crop, and your responses are legenDAIRY, there's no point in trying to BUTTER me up here. However, in spite of all the BULL, I appreciate you STEERing me in the right direction, and not succumbing to the HERD mentality.

This could go on and on, but I lack the time to COW-tow any further.

I'd STEAK my life I've HERD some of this before, but it beHOOVES me to stoop to such standards. Besides, I'm too much of a COWHERD, and I'm sure it PASTURE time to even care.

thanks for the morning chuckle.