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tas1

Nov 27 2007, 06:39 PM

We have a client who amended his plan to include safe harbor match as of 1/1/07. He did almost everything right - posted his notice on time, handed out a new SPD with the notice, enrolled his employees on time, started deductions as of the very beginining of the year and has made the safe harbor match to all eligible ee's from day one as well. However, he actually signed the document on the first business day of 2007 - 1/2/07.

Is this a valid safe harbor plan for 2007? Everything I've read says to adopt 'before' the beginning of the plan year. Is there some stretch of logic that would make this valid - i.e. he signed it at the very beginning of the day

In operation, the employees were not damaged in any way - they knew about the safe harbor in a timely manner and were able to defer and receive the match from day one.

He just put pen to paper one day late. Thanks so much for your help.

J4FKBC

Nov 27 2007, 11:57 PM

1.401(k)-3(e):
(e) Plan year requirement

(1) General rule. --Except as provided in this paragraph (e) or in paragraph (f) of this section, a plan will fail to satisfy the requirements of section 401(k)(12) and this section unless plan provisions that satisfy the rules of this section are adopted before the first day of the plan year and remain in effect for an entire 12-month plan year. In addition, except as provided in paragraph (g) of this section, a plan which includes provisions that satisfy the rules of this section will not satisfy the requirements of § 1.401(k)-1(b) if it is amended to change such provisions for that plan year. Moreover, if, as described under paragraph (h)(4) of this section, safe harbor matching or nonelective contributions will be made to another plan for a plan year, provisions under that other plan specifying that the safe harbor contributions will be made and providing that the contributions will be QNECs or QMACs must also be adopted before the first day of that plan year.
Emphasis added. Seems fairly clear for Treasury writing.

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