CINCINNATI - In Notice 2020-52, the IRS provided additional guidance and temporary relief for sponsors of safe harbor 401(k) plans who wish to reduce safe-harbor contributions. In summary, Notice 2020-52:
- Explains that an employer may amend a safe harbor plan to reduce contributions made only for highly compensated employees, while preserving safe harbor plan status; and
- Allows an employer to amend its safe-harbor plan ‘mid-year’ to reduce or suspend safe harbor contributions (both safe-harbor non-elective and matching contributions) to non-highly compensated employees regardless of whether the employer is suffering an economic loss or has previously provided a notice that that the employer may suspend or reduce the safe harbor contribution during the year.
Importantly, Notice 2020-52 specifies that a safe-harbor plan sponsor’s ability to reduce or suspend contributions for non-highly compensated employees, as summarized in the second bullet point, is only available until August 31, 2020.
Please contact Steve Kisling ([email protected]), Chris Freeman ([email protected]) or Bob Brant ([email protected]) as soon as possible if you would like to discuss benefits and consequences of the relief alternatives available for your safe-harbor plan pursuant to Notice 2020-52.