If a plan sponsor wants to restate their SEP to a 401(k) safe harbor, can the safe harbor feature be added in the middle of a year? Does the SEP follow the same rules as a 401(k) in adding the safe harbor match or nonelective?

A SEP is not a qualified plan. Hence, you can't restate a SEP into a 401(k) plan. You can, therefore, create a SH 401k plan at any time if the only existing plan is a SEP. However, since a SEP is not a qualified plan, the rules regarding how a SEP can be terminated are not the same as a qualified plan. If you review some of the SEP threads you should see comments along the lines that a SEP creates a contractual promise that can't be eliminated retroactively.

Although a qualified plan can be adopted, the SEP can not be amended into a qualified plan. If a 401(k) is adpted, contributions under the SEP reduce the allowable maximum profit-sharing limit dollar-for-dollar. [IRC 404(h)(2)]

The SEP can be terminated by resolution and a notice of the effect of the amendment (with copy of amendment) provided to employees. There may be top-heavy issues, especially if partipation requirements differ.

Bear in mind also that if you maintain a qualified plan concurrently with a SEP plan, you must use a prototype SEP document. You may not use the 5305-SEP when you maintain another plan.