We have client who established a 401k last year. The owners did not want any matching or company contribution. The owners were not going to participate. Surprise—one owner did contribute, none of the employees contributed. The Plan is top-heavy thus the company must make a rather significant top-heavy contribution. This is all discovered after 12-31-2013.

We are being told since they are past the required 30 day window of notifying participants the plan will now become a safe-harbor plan they are locked into the plan the way it is for another year until the end of 2014. They can notify participants by the end on November 2014 the plan will become safe-harbor for 2015.

Is there not a way the Plan Sponsor can switch to Safe-Harbor mid-year after they discover it may be better for them to be safe-harbor? Are they really stuck for another year “as is”?

I always appreciate your input.

Thank you,
Ed