The IRS today released an advance version of Notice 2016-16 providing guidance on mid-year changes to a safe harbor plan under sections 401(k) and 401(m).
Notice 2016-16 [PDF 63 KB] provides that a mid-year change either to a safe harbor plan or to a plan’s safe harbor notice does not violate the safe harbor rules merely because it is a mid-year change, provided that applicable notice and election opportunity conditions are satisfied, and the mid-year change is not a prohibited mid-year change (as described in today's notice).
Notice 2016-16 includes: (1) additional participant notice and election opportunities for some mid-year changes; (2) provisions that contributions to a section 401(k) or 401(m) retirement plan must not discriminate in favor of highly compensated employees; and (3) a request for comments on additional guidance that may be needed, in particular with respect to mid-year changes to safe harbor plans in instances when a plan sponsor is involved in a merger or acquisition.
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