Employers taking this approach assume some legal risk and should consult with legal counsel. Sponsors of these plans may be able to eliminate the match retroactively to the start of the plan year for employees who haven’t yet satisfied the service condition, which arguably means they haven’t accrued a right to receive a matching contributions. However, an exception may apply to plans that condition the match on employees satisfying a service condition - for example, completing 1,000 hours or being employed on the last day of the year. Anti-cutback issuesĮRISA’s anti-cutback rules generally require employers implementing a suspension to fund matching contributions based on deferrals and compensation through the amendment’s adoption date (or effective date, if later). However, even if the contributions are entirely discretionary, employers still might want to review past employee communications for any statements that could be interpreted as promising a match, since the expectation of a match likely influenced some employees’ deferral elections. If the plan gives the employer discretion to make matching contributions, an amendment may be unnecessary. Amending the planĪn employer will need to amend its plan to suspend matching contributions if they are required by plan terms - as is usually the case. But employers taking this action still must follow the ordinary notice and election requirements for midyear changes to safe harbor plans. The relief doesn’t apply to employers suspending or trimming safe harbor matching contributions.Įmployers can maintain their plans’ safe harbor status by suspending or reducing contributions only for highly compensated employees (HCEs), since contributions to HCEs aren’t safe harbor contributions. Without this relief, this notice is usually due at least 30 days before the suspension or reduction takes effect. 31 to provide a supplemental notice explaining the change and procedures for participants to change their deferral elections. Employers suspending or reducing safe harbor nonelective contributions have until Aug.This relief is available to employers that adopt a plan amendment suspending or reducing contributions between March 13 and Aug. During the COVID-19 pandemic, an employer can suspend or reduce safe harbor matching or nonelective contributions, even if it isn’t operating at an economic loss or its safe harbor notice didn’t mention the possibility of suspending or trimming contributions.IRS issues new guidance on suspending or reducing safe harbor contributions
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