Safe Harbor 401k Rules Prevent Mid Year Changes

by 401kadmin

Many people have asked if the Safe Harbor 401k rules allow for a Safe harbor 401k to be amended during the year.

The answer is NO. According to the Safe Harbor 401k rules, once the Safe Harbor Notice is issued the plan provisions must remain the same for the year. The Safe Harbor 401k rules state that a Safe Harbor Notice must be issued to all participants at least 30 days before the start of the year.

According to the Safe Harbor 401k rules if you amend the Safe Harbor provisions in the middle of a year, you lose the safe harbor status and the 401k would then be subject to testing.

the Safe Harbor 401k rules also state that the consequence for an improper mid year safe harbor amendment isn’t just losing the benefits of the safe harbor. The Safe Harbor 401k rules state that the plan may not satisfy the non-discrimination testing, which means the plan would technically be disqualified.

There are certain amendments that a safe harbor plan can make in mid year. IRS Announcement 2007-59 says that a safe harbor 401k plan will not be deemed to have impermissibly amended the plan solely because they amend for Roth contributions or hardships. Thus the interpretation of the IRS is that certain amendments can be made without violating the Safe Harbor 401k rules

To talk with us about Safe Harbor 401k Rules, you can contact us via our Contact Page. Or you can go to our request a quote page and Request A Quote for your Safe Harbor 401k.