Mid-Year Amendments to 401(k) Safe Harbor Plans Allowed

The Internal Revenue Service has issued guidance sanctioning mid-year changes to 401(k) safe harbor plans regarding new rules for Roth deferrals and hardship withdrawals.
In announcement 2007-59, the IRS said “a plan will not fail to satisfy the requirements to be a § 401(k) safe harbor plan merely because of mid-year changes to implement a qualified Roth contribution program (as defined in § 402A) or the hardship withdrawals described in part III of Notice 2007-7.”
The IRS said the announcement was issued to address employer concerns about adding provisions during a plan year to their § 401(k) safe harbor plans in order to take advantage of recently effective changes to these rules under the Pension Protection Act of 2006 (PPA) when the pre-year safe harbor notice required from sponsors does not include information about the added provisions.
The PPA made the ability to implement a qualified Roth 401(k) contribution permanent and expanded hardship rules to allow for the distributions to cover qualified expenses for a primary beneficiary of a participant’s account – which may not be a spouse or dependent.
In the announcement the IRS also requested comments regarding whether additional guidance is needed with respect to mid-year changes to a § 401(k) safe harbor plans for the Income Tax Regulations (relating to mid-year amendments to become a safe harbor plan using non-elective contributions) and § 1.401(k)-3(g) (relating to mid-year amendments to suspend or reduce safe harbor matching contributions).
Written comments should be submitted by September 17, 2007 to CC:PA:LPD:DRU (Announcement 2007-59), Room 5203, Internal Revenue Service, POB 7604 Ben Franklin Station, Washington, D.C. 20044.
Comments may also be submitted via the Internet at notice.comments@irscounsel.treas.gov with the subject line: Announcement 2007-59.