IRS Allows Mid-Year Changes To Section 401(K) Safe Harbor Plans

On January 29, 2016, the Internal Revenue Service issued Notice 2016-16 (the "Notice") which provides guidance on mid-year changes to safe harbor plans under Section 401(k) of the Internal Revenue Code.

How Does This Guidance Affect Plan Sponsors?

1. Mid-year changes now permitted: Plan sponsors with safe harbor 401(k) plans now have the opportunity to make adjustments to their plans during the course of the year as circumstances warrant without having to wait until the next year.
2. A safe harbor plan may now be the appropriate choice: By eliminating the uncertainty about the ability to make mid-year changes, plan sponsors who were reluctant to adopt safe harbor plans because they wanted to retain flexibility to make mid-year changes to their plans should revisit whether a safe harbor plan design may now be appropriate.