Proposed Amendments to Allow Suspension or Reduction of Nonelective Contributions

In recognition of intense lobbying from practitioner and employer groups, the IRS has issued proposed regulations that would allow the suspension or reduction of Section 401(k) safe harbor nonelective contrituions.

Document Excerpt


Explanation of Provisions

The proposed regulations would amend §§ 1.401(k)–3 and 1.401(m)–3 to permit an employer sponsoring a safe harbor plan described in section 401(k)(12) or 401(k)(13) that incurs a substantial business hardship (comparable to a substantial business hardship described in section 412(c)) to reduce or suspend safe harbor nonelective contributions during a plan year. These proposed regulations would provide an employer an alternative to the option of terminating the employer’s safe harbor plan in such a situation.




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