As the end of year approaches, now is the time for safe harbor 401(k) plan sponsors to prepare their annual safe harbor notices.

401(k) Plans that satisfy nondiscrimination testing via the employer contribution safe harbors in Internal Revenue Code §§ 401(k)(12) and (13) are required to send notices to participants within a reasonable time prior to the start of the plan year. Per IRS regulations, the timing is deemed reasonable if the notice is provided at least 30 days (and no more than 90 days) prior to the start of the plan year (so, by December 1 for calendar-year plans).

Revising a Prior Year’s Safe Harbor Notice

For a plan sponsor that has previously sent out the safe harbor notice, last year’s notice should be updated for any changes. This may include updating the date of the notice, annual contribution limits (when published by the IRS), any deferral changes, any employer contribution changes (including vesting schedules), and any distribution changes (perhaps implementation of the qualified birth or adoption distribution option).

Additionally, if the prior year’s safe harbor notice did not contain a statement that the employer may reduce or suspend contributions midyear, plan sponsors should consider adding that language to the safe harbor notice. The statement must note that the any reduction or suspension will not become effective until at least 30 days after participants have received notice of such reduction or suspension.

New Safe Harbor Notices

For 401(k) plans implementing the safe harbor employer contributions for the first time in 2022, the notice needs to contain all the information required by Treasury Regulation §§ 1.401(k) through 3(d)(2). Plan sponsors should also consider adding the midyear change or suspension language noted above.