On June 29, 2020, the IRS issued guidance providing updated COVID-19-related relief and other clarifications for sponsors considering mid-year changes to their safe harbor 401(k) plans. The guidance, set out in Notice 2020-52 (the Notice), provides clarification for plan sponsors that they can eliminate safe harbor 401(k) contributions for “highly compensated employees” (HCEs) only and retain the plan’s safe harbor status, provided that the safe harbor 401(k) contributions continue to be made for non-highly compensated employees (NHCEs).
The notice also provides temporary relief for employer sponsored 401k plans due to COVID-19, allowing plan sponsors to adopt mid-year amendments between March 13, 2020 and August 31, 2020, that would eliminate safe harbor matching contributions or mid-year nonelective contributions. The plan would be deemed to have satisfied the threshold “operating at an economic loss” or the “safe harbor notice” content requirements for any mid-year suspension of safe harbor contributions.
Further information can be found here: https://www.irs.gov/pub/irs-drop/n-20-52.pdf.