Still Time to Make Midyear Amendments to Safe Harbor Defined Contribution Plans
Highlights
The IRS issued Notice 2020-52 to provide temporary relief to sponsors of safe harbor defined contribution plans who make midyear plan changes
Contributions made for highly compensated employees (HCEs) are not considered safe harbor contributions, and a midyear change that reduces only contributions for HCEs will not affect a plan’s safe harbor status (although notice requirements apply)
Certain requirements are temporarily relaxed for midyear reductions or suspensions of safe harbor contributions, including the 30-day notice requirement applicable to midyear changes to safe harbor nonelective contributions
The COVID-19 pandemic caused many businesses to struggle. As a result, some plan sponsors have considered suspending, or have already suspended, safe harbor matching contributions or safe harbor nonelective contributions in 2020 to defined contribution plans (i.e., 401(k) plans and 403(b) plans that are deemed to satisfy certain nondiscrimination testing requirements because they include specified minimum matching or nonelective contribution provisions).
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