The 401(k) plan is aggregated with a DB plan for meeting the coverage test. The 401(k) is safe harbor match and NHCEs get an additional 7.5% contribution to satisfy the minimum gateway for testing the DB and DC plans together.
Question: Can the 401(k) plan amend the safe harbor formula mid-year to become a 3% nonelective and then make a 4.5% additional contribution to satisfy the gateway? I think it would be OK to do this as of the beginning of a plan year, but I am uncertain about whether it can be done mid-year.
Thank you!
Full Version: Safe Harbor Mid-Year Change (Match to Nonelective)
You cannot change the safe harbor formula mid year. I've heard some debate that you might be able to increase the safe harbor match (which we do not permit our clients to do) but lowering the match, changing to non-elective or from non-elective to match mid year is not permitted.
You can't change the SH match mid-year and remain SH. 1.401(k)-3(e)(1) prohibits mid-year amendment of the provisions that satisfy 1.401(k)-3.
You can reduce or suspend the SH match during the year if you follow 1.401(k)-3(g). One of the requirements is that the plan be amended to provide that the plan satisfy the ADP test for the entire year using the current year testing method. Another requirement is that the match be funded through the effective date of the change, including the 30 day notice period.
You can reduce or suspend the SH match during the year if you follow 1.401(k)-3(g). One of the requirements is that the plan be amended to provide that the plan satisfy the ADP test for the entire year using the current year testing method. Another requirement is that the match be funded through the effective date of the change, including the 30 day notice period.
QUOTE (Kevin C @ Apr 28 2009, 10:53 AM) 
You can't change the SH match mid-year and remain SH. 1.401(k)-3(e)(1) prohibits mid-year amendment of the provisions that satisfy 1.401(k)-3.
You can reduce or suspend the SH match during the year if you follow 1.401(k)-3(g). One of the requirements is that the plan be amended to provide that the plan satisfy the ADP test for the entire year using the current year testing method. Another requirement is that the match be funded through the effective date of the change, including the 30 day notice period.
You can reduce or suspend the SH match during the year if you follow 1.401(k)-3(g). One of the requirements is that the plan be amended to provide that the plan satisfy the ADP test for the entire year using the current year testing method. Another requirement is that the match be funded through the effective date of the change, including the 30 day notice period.
I didn't think so, but many plan sponsors are looking to save money! Very helpful. Thank you.
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