In the News: IRS Issues Final Safe Harbor Rules For Employers Facing Business Hardships - Abel HR

W2 Issues/Concerns

  • This field is for validation purposes and should be left unchanged.

Blog

Check out our weekly blog posts and see the latest news and discussions happening in the HR world of business.

In the News: IRS Issues Final Safe Harbor Rules For Employers Facing Business Hardships

Bloomberg BNA recently reported that the Internal Revenue Service (IRS) has issued final regulations allowing employers operating at an economic loss to suspend or reduce non-elective contributions made to safe harbor tax code Section 401(k) plans midyear.

The regulations came at the request of businesses during the economic downturn, when employers were seeking an alternative to terminating their employee retirement plans if they needed to temporarily reduce or suspend their non-elective contributions to the plans, American Benefits Council senior counsel Jan Jacobson noted.

Under the 2009 proposed rules, which employers were allowed to rely on until final rules were published this past month, employers had to have a substantial business hardship to suspend or reduce midyear non-elective contributions to safe harbor 401(k) plans, according to the IRS. Under the final regulations, employers also can reduce or suspend their nonelective contributions, regardless of their financial condition, if they notify participants before the beginning of the plan year that their contributions could be reduced or suspended midyear. Further, the IRS noted that if a reduction or suspension does occur, employers must provide subsequent notice to participants at least 30 days prior to the reduction or suspension of the contribution.

The IRS indicated that the final rules were modified in an effort to “achieve uniformity” between the rules applying to midyear reductions or suspension of safe harbor matching contributions and the rules governing midyear reductions or suspensions of safe harbor nonelective contributions. As a result, safe harbor matching contributions are permitted to be reduced or suspended only if an employer meets one of two requirements, the IRS said.

The IRS noted that because this is a change from the previous requirements on matching contributions, the change is effective for plan years beginning on or after January 1, 2015. Further, the group noted that it might publish more guidance of “general applicability” in the Internal Revenue Bulletin that addresses more situations in which a plan won’t fail to satisfy the requirements of a safe harbor Section 401(k) plan year, “even if the plan is amended during the plan year to implement a mid-year change to those provisions.”

Featured BLOGS

  • How To Navigate Employee Rewards

    Recognition and employee rewards are key to increasing engagement in the office. Not only that, but this can motivate your employees to become more productive and efficient. Thanking someone, whether verbal or written, would go a long way, but what other tangible or thoughtful rewards can you give to employees? Plus, how do you start a rewards or recognition program? Identifying How and When To Give Employee Rewards Companies may choose to give employee rewards depending on the occasion or situation. Here are some instances that employers give rewards: Job well done Great work performance Milestones While you may expect

  • How To Navigate a Non-Linear Reporting Structure

    Although it is not ideal, a Gallup survey suggests that 84 percent of US employees report to multiple managers. In past years, most businesses followed a hierarchal structure, whereby employees report to one person, who reports to the next in line, and so on up to the CEO. However, companies today operate in a more project-based environment, with teams spanning multiple departments on an as-needed basis.  While the matrixed workplace does have its perks, namely that someone can work across departments and have accountability and oversight on various projects, it can present its challenges. Probably the biggest pitfall occurs when

Archives