Mid Year Amendment to Safe Harbor Plan

Hi all - I have seen threads discussing the issue of amending a safe harbor plan's definition of compensation mid-year.  It seems people are in agreement that you cannot amend to exclude Compensation mid-year because this would reduce the safe harbor contribution.  I have a client that would like to exclude auto allowance pay starting 7/1/2019 (a calendar year plan). 

Notice 2016-16 prohibits the following change-

• A mid-year change to modify (or add) a formula used to determine matching contributions (or the definition of compensation used to determine matching contributions) if the change increases the amount of matching contribution, or to permit matching contributions.  This type of change is possible if certain conditions are met.

If my client amends to exclude auto allowance mid year, it would decrease the safe harbor match for the remainder of the year (they allocate each pay period).  The above only prohibits a plan from an amendment that would increase the safe harbor contribution.

So, can I amend mid-year without it having to be retro to 1/1/2019?  If NOT, what am I missing?

Thanks,

Kathryn

I think your reading of 2016-16 is too narrow.  You missed III.B which directly prohibits what you want to do.  Your quoting of III.D is therefore misguided.

Thanks, Mike.  I agree.  I had come to that conclusion as well.  Looking to have the change effective 1/1/2020. 

Also, it will not be drafted as an "auto allowance" exclusion, but would be the safe harbor definition that excludes fringe benefits, reimbursements, etc.  I saw some threads on whether auto allowance is actually a fringe benefit  and there was interesting debate, but I believe that it is.