Midyear modifications to a safe harbor and non-safe harbor 401(k) plan.Here are the most practical options for employers to reduce or suspend contributions before the end of a plan year: (See Suspend theĤ01( k) Match? Issues to Weigh, Pitfalls to Avoid. While reducing employer contributions can hurt employee morale, it is sometimes a better option for reducing labor costs than furloughs and layoffs, for example. In tough economic times, many employers are seeking to cut compensation-related costs employer contributions to 401(k) plans are an obvious target. It's estimated that more than 90 percent of 401(k) plans provide some form of employer contributions. The article below is based on compliance with the proposed regulations.Įmployer-sponsored 401(k) plans often include employer contributions through a variety of funding mechanisms, including matching contributions on employee deferrals, nonelective contributions that aren't dependent on what employees contribute, and discretionary contributions that are optional and usually made at the end of the plan year as a form of profit-sharing. SHRM Online article " Final Regulations on Suspending 401(k) Safe-Harbor Contributions." Safe-harbor notices may need to be revised.
15, 2013, the IRS issued final regulations on mid-year reductions or suspensions of “safe harbor” contributions made to 401(k) plans, revising the proposed regulations issued in May 2009.
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