The Internal Revenue Service issued proposed regulations on May 18, 2009 which allow for the suspension or reduction of safe harbor nonelective contributions under certain 401(k) safe harbor plans.

A safe harbor 401(k) plan is a 401(k) plan that requires an employer to make certain levels of plan contributions for nonhighly compensated employees. In exchange, the plan is exempt from the regular 401(k) plan requirement to have annual nondiscrimination testing performed. Employer contributions under a safe harbor 401(k) plan are made in the form of either matching contributions or nonelective contributions.

Please see full ASAP for more information.