Adding Safe Harbor Non-Elective and Deferrals to Profit Sharing Plan Mid-Year

Profit sharing plan's year ends Dec. 31.  My boss wants to convert the plan to add deferrals and safe harbor non-elective 3%.  I know the regs. treat this as a new plan for ADP/ACP and notice purposes.  The issue I'm having is the deferrals are going to be effective as of August 1, but he wants the safe harbor provisions to be effective as of the beginning of the plan year on Jan. 1 so they can make the 3% contribution for this year, using it as an offset for the profit sharing piece.  I know the compensation computation period can exclude pre-participation comp., but something doesn't sit right with me on this.  Is there a reg. that precludes the safe harbor prior to August 1 as nobody can defer during this period.  And is the restatement date of Jan. 1 correct then, and there are no short plan year issues I'm missing?

How could the SH be effective Jan 1 if they didn't distribute the SH Notice?

I knew the 30 day notice requirement was relaxed for these safe harbor conversions to the effective date, but it didn't occur to me when he made the suggestion.  Even if I made both deferrals and safe harbor provisions effective Aug. 1, would it be alright to use the entire plan year as the computation period for calculating this non-elective 3% contribution for the shortened period.

There is no requirement to use entry date compensation for determining the safe harbor contribution.  If the plan is set up to use compensation prior to entry for the initial safe harbor contribution and have it calculated on an annual basis, it will accomplish what your boss wants.  When I do that, I typically use our VS document's special effective date section to specify that the initial year uses compensation prior to entry and starting the following year, entry date comp is used. Whichever way it is done, make sure the document is clear about how it works.

If they are going to offset PS with the SH, what's the difference?  Aren't the end numbers going to be the same anyway?  ($100,000 total or 5% to everyone)

The total employer contribution may be the same, but it's not necessarily the same for each participant.  We don't know the PS formula or the allocation conditions.  

When we use full year comp for the initial SH contribution, it's because that's what the client wants. It's their plan.  If the rules don't prohibit it and the document allows it, they get what they want.