It’s that time again. The 401(k) safe harbor notice requirement of December 1 is fast approaching.  And if you’re a plan sponsor still undecided about whether you want to have a Safe Harbor 401(k) plan for 2009 because of economic uncertainties next year, then you can take advantage of a safety value that’s permitted by the regulations.

Instead of distributing a Safe Harbor notice that guarantees the 3% contribution regardless of its subsequent financial condition, an employer can provide a “conditional notice” at least 30 days before the start of the plan year.

The notice would state that the employer may give a safe-harbor contribution for the following year. And then no later than 11 months later, the employer must provide another notice indicating that the Safe Harbor has been elected and the 3% contribution will be made for that year.

That’s for the 3% Safe Harbor contribution across the board. But what about the Safe Harbor match: can it be stopped during the plan year? The answer is yes by providing a notice to the employees at least 30 days before the contributions are to be stopped.

And here’s two important matters that are part of this discussion:

  1. There must be the proper plan documentation.
  2. The 401(k) discrimination tests must be provided for the entire plan year.

Actually, there’s one more important consideration – your employee’s expectations. Go beyond the formal notice requirements when communicating with your employees.

Graphic above by YES NO MAYBE, a London-based streetwear / urban clothing label that was "born of its creator’s indecisiveness."