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Mid-Year Changes to Safe Harbor Plans

The IRS issued guidance allowing certain types of mid-year changes to safe harbor plans that would not jeopardize safe harbor status. Applicable plans include traditional safe harbor, qualified automatic contribution arrangements (QACA), and 403(b) plans. Examples of permissible mid-year changes include but are not limited to non-elective deferral percentage changes, default investment changes, and the addition of a 59 1/2-withdrawal provision. If a mid-year change alters information in the existing required safe harbor notice, participants must be given notice within a reasonable amount of time prior to its effective date (“reasonable” would be between 30 and 90 days prior to the effective date of change or at least 30 days if the mid-year change includes a modification to the contribution so that participants have enough time to adjust their elections).

www.irs.gov; March 2016.