Suspending nonelective Safe Harbor mid-year

Hi all,

Am I reading the regulations correctly?  A 401(k) plan can eliminate their 3% nonelective Safe Harbor contribution mid year, without showing that the company is operating at a loss, as long as the notice that was distributed in December of the prior year included language that the Safe Harbor may be suspended?

Thank you!!

Correct. Though participants must be given 30 days notice, and receive safe harbor contributions through that period. 

23 minutes ago, justanotheradmin said:

Correct. Though participants must be given 30 days notice, and receive safe harbor contributions through that period. 

^this rule relates to ending a safe harbor match.

As for the 3% non-elective, if the correct notice was handed out and the Plan document allows for it, absolutely.

The Notice is commonly referred to as "The maybe notice"

They did not get the "maybe" notice, and it is not a Safe Harbor match.  They received the notice saying the employe will make the nonelective 3% that is allocated to all eligible for the plan, whether or not they defer.

Lou S., are you saying that only if the maybe notice was used, they can eliminate mid year, but not in my situation?

Your reply and justanotheradmin's seem to be answering differently.

Thank you again!!

Yes, it can be removed if certain conditions (as mentioned above) are met. See IRS notice 2016-16 III B (iii) 

(iii) Reduction or suspension of safe harbor contributions or changes from safe harbor plan status to non-safe harbor plan status (permitted only as described in §§ 1.401(k)-3(g) and 1.401(m)-3(h)).

Not disagreeing with Lou - just mentioning that the terminology of the Notice is different for different for different people. Many people refer to the "maybe" notice as the notice one gives when a plan utilizes the "maybe" election - that is, the plan is NOT a safe harbor UNLESS the plan is amended into safe harbor status for the year.

In your situation with a 3% SH contribution, we would refer to this as a "maybe not" notice, which as discussed previously allows you to amend out of SH status. Sample wording contained in the annual Safe Harbor Notice - we use the FIS/Relius document system.

IV.   Suspension or reduction of safe harbor nonelective contribution.

The Employer retains the right to reduce or suspend the safe harbor nonelective contribution under the Plan. If the Employer chooses to do so, you will receive a supplemental notice explaining the reduction or suspension of the safe harbor nonelective contribution at least 30 days before the change is effective. The Employer will contribute any safe harbor nonelective contribution you have earned up to that point. At this time, the Employer has no such intention to suspend or reduce the safe harbor nonelective contribution.

Thank you all!!!

3 hours ago, Belgarath said:

In your situation with a 3% SH contribution, we would refer to this as a "maybe not" notice, which as discussed previously allows you to amend out of SH status. Sample wording contained in the annual Safe Harbor Notice - we use the FIS/Relius document system.

Yep, I believe Derrin Watson coined the "maybe not" term in an ASAP or Relius update after they came out.