The Safe Harbor Change for Non-Electives is Big

The SECURE Act created much-needed change to the safe harbor non-elective contributions, making it more of a weapon to combat failed discrimination testing. Previously, a plan sponsor could only adopt the non-elective contribution prior to the Plan Year with a notice. Now, the contribution can be added at any time during the year and even after the Plan Year has ended if the plan sponsor ups the contribution to 4% of pay (but the plan still needs to pass the matching ACP test if adopted after the year). Regardless of the timing, the notice requirement is gone for good.

For clients that have testing issues because of their demographics, this is something they should know about. The increased flexibility of adding the non-elective could go a long way in minimizing the need for deferral refunds or corrective QNEC contributions.

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