What are the requirements for providing a brand-new plan with a safe harbor notice? What about providing that notice to a brand-new employee?
Rev. May 24, 2007, E-mail Alert 2007-7

Timing for providing a safe harbor 401(k) notice for a brand-new plan or to a new participant

Brand-new plan
A brand new 401(k) plan is established with safe harbor provisions. The plan has immediate eligibility provisions and entry date coinciding with the effective date of the plan for deferrals and employer contributions. The plan will need to provide the safe harbor notice at anytime between 90 days before the effective date of the plan and up to the actual effective date of the plan.
Example: An employer is adopting a safe harbor 401(k) plan effective September 1, 2009. The plan design provides for immediate eligibility and entry to make deferrals and to receive the safe harbor matching contribution. The employer must provide the safe harbor notice between June 3, 2009 and September 1, 2009. Thus, a new plan can provide the notice as late as the actual effective date of the plan.

Newly eligible participant in an existing safe harbor 401(k)
When must the safe harbor notice be provided to a new participant in an on-going plan?
A newly eligible participant in an existing safe harbor 401(k) may be provided with the safe harbor notice under the same timeframe as applicable to a new plan.

Example: An employer who sponsors a safe harbor 401(k) with a 6 months of service eligibility requirement hired a new employee on March 31, 2009. This employee will enter the plan on October 1, 2009. The employer must provide the safe harbor notice no earlier than July 3, 2009 and not later than October 1, 2009.

Note: There is a special rule to coordinate with the annual safe harbor notice timeframes.

Specifically, for safe harbor notice purposes, a new employee is defined as an individual who becomes eligible after the 90th day before the beginning of the plan year. Thus, in a calendar year plan any employee who becomes eligible to participate between October 2 and December 31 would be provided with a safe harbor notice under the new employee rules. Specifically, no sooner than 90 days before the eligibility date and no later than right up to the date of eligibility.

Thus, the annual safe harbor notice sent between October 3 and December 2 each year (between 90 and 30 days before the beginning of the plan year) would cover all on-going participants. The same notice would cover newly eligible employees through the date it was provided. For those new employees who become eligible within the last 90 days of the plan year, the annual safe harbor notice may be used to satisfy those who are newly eligible, right up to the last day of the year.


For more information on safe harbor 401(k) plans:
Safe Harbor Chart
Safe Harbor Page

Bill Grossman, QPA