3774 / What notice must be provided to participants in a 401(k) safe harbor plan?

Editor’s Note: Under the law prior to January 1, 2020, a safe harbor 401(k) plan was required to provide an annual participant notice prior to each plan year alerting participants to their plan rights and obligations. This notice was required whether the employer safe harbor contribution was provided by a nonelective (i.e., profit-sharing) or matching employer contribution. Under the SECURE Act for plan years beginning after December 31, 2019, the annual safe harbor notice has been eliminated for 401(k) plans that are based upon nonelective employer contributions. See Q 3776.

The notice requirement remains for plans based upon employer matching contributions. In addition, under the SECURE Act, a nonelective contribution 401(k) plan can be adopted on any date prior to 30 days before the end of the plan year still using the 3 percent of compensation nonelective contribution. However, if the noncontribution plan is adopted within the last 30 days of a plan year, the required nonelective contribution rises to 4 percent of compensation. Regardless, the ability to adopt a nonelective plan midyear is not available if the plan was a matching contribution safe harbor 401(k) plan at any time during a year.¹

Every year, an employer must provide certain written notices to each employee eligible to participate in a plan. This notice must be provided prior to the start of the plan year. The written notice must include a statement as to which type of safe harbor contribution will be made to the plan (i.e., the safe harbor match or safe harbor nonelective contribution). The statement must explain:

(1)  how the contribution is calculated and whether any conditions exist to be eligible to use it, including a description of the levels of safe harbor matching contributions;