![]() ![]() ![]() Of course, one of the consequences of the IRS waiting until now to issue this notice is that, if the plan sponsor wants to retroactively re-adopt a safe harbor nonelective contribution for the 2020 calendar year, we are within 30 days of the year end so the nonelective contribution must be 4% for 2020. The Q&A asks: if a plan sponsor reduced or suspended its safe harbor nonelective contribution mid-year, can the employer then amend its plan retroactively at year end to re-initiate a safe harbor nonelective contribution for the full year (thereby preserving both the safe harbor and the top heavy waiver for the year)? The IRS responded that the answer is yes! “The retroactive plan amendment rules,” the Notice observes, “are not conditioned on whether a prior plan amendment reduced or suspended nonelective contributions during the year.” As a result, the IRS does not impose such a requirement. In Notice 2020-86, Q&A-8 of Part IV, the IRS shows its more lenient side. As this is not addressed in SECURE, we recommended that our clients take a conservative view of the rules and not engage in this practice. We have been asked many times in recent months whether an employer that suspended its 401(k) safe harbor contributions during 2020 could use the late safe harbor nonelective adoption rules of SECURE to retroactively reinstate the safe harbor before year end. One of the items addressed in the Notice demonstrates the IRS’s holiday season generosity! As this can help employers for the 2020 plan year end, we thought it was important to bring it to your attention right away. In brand new Notice 2020-86, issued on December 9, 2020, the IRS provides some additional guidance on the post-SECURE safe harbor 401(k) plan rules.
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