The participant safe harbor notice requirements are generally satisfied if eligible employees are provided with a notice that meets certain content and timing requirements. These requirements generally relate to contribution levels, vesting provisions, continuity of specific plan provisions for the entire 12-month plan year, and participant safe harbor notices. Specifically, safe harbor plans are not subject to nondiscrimination testing under Code Section 401(k) (“ADP testing”) and/or Code Section 401(m) (“ACP testing”) (and, in some cases, the “top-heavy” plan requirements under Code Section 416) because safe harbor plans satisfy certain other requirements under the Code and the Treasury Regulations. Mid-year amendments to increase matching contributions or add discretionary matching contributions, except in limited circumstances.Ī safe harbor plan is a plan that includes a cash or deferred arrangement that is not subject to certain nondiscrimination testing requirements under the Internal Revenue Code (“Code”). Mid-year amendments that directly impact safe harbor contributions (other than the current exception for nonelective safe harbor contributions) and Mid-year amendments to plan provisions that do not impact the content of the safe harbor notice andĬertain mid-year amendments to plan provisions that impact the content of the safe harbor notice (which generally do not change the safe harbor contribution provisions), but only if an updated safe harbor notice and election opportunity is provided to participants. Fortunately, the IRS issued additional guidance in Notice 2016-16 that specifies permissible mid-year amendments to safe harbor plans (including both 401(k) and 403(b) plans), the time at which updated safe harbor notices and election opportunities are required, and the type of mid-year amendments that are prohibited. The concern has been that a mid-year amendment could cause a plan to lose its safe harbor status, which would subject the plan to nondiscrimination testing requirements. For many years, plan sponsors, service providers, and practitioners have debated whether mid-year amendments to “safe harbor plans” are permissible given the limited available guidance on this issue.
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