Welcome to Part 10 (of 10) of our series about the SECURE 2.0 Act of 2022 (SECURE 2.0) (our other articles are on our JL Employee Benefits Blog Page).  Among the many changes within SECURE 2.0, the following allow for increased flexibility for participants to access certain retirement plan accounts when faced with qualifying emergencies, hardships, and disasters.

Sections 312 & 602 — Effective after December 31, 2022, an employer may rely on an employee’s self-certification that they have experienced an event that qualifies as a financial hardship.  Specifically, the new rules allow for self-certifications as to both (i) the fact that they have a hardship; and (ii) that the amount of the distribution is not in excess of the employee’s financial need.  This welcome change is expected to significantly streamline the plan administration of hardship applications.

Section 312 of SECURE 2.0 also allows an employer to rely on an employee’s written certification for participants of a 457(b) plan experiencing an unforeseeable emergency.  The certification is similar to those for the 401(k) and 403(b) plans in that it must state (i) the participant faces an unforeseeable emergency and (ii) the requested amount is not greater than the emergency need. 

Also, effective for plan years beginning after December 31, 2023, the new 403(b) plan hardship rules now align with similar rules for 401(k) plans.  Specifically, Section 602 eliminates the plan loan prerequisite to a hardship distribution for 403(b) plans, which now may also include certain employer contributions.

Section 331— Effective for disasters after December 27, 2020, SECURE 2.0 finally makes the exception to the 10% early withdrawal tax for federally declared disasters permanent.  Under the new rules, eligible distributions are up to $22,000 per disaster.  Individuals receiving eligible distributions are not subject to the early withdrawal penalty of 10% ordinarily applied to hardship withdrawals.  For the distribution to qualify for the exemption, the individual’s principal residence must be in a federally declared disaster area.  Also, there must be a corresponding economic loss to receive such a distribution.  Individuals are also eligible to repay the declared disaster distributions within three years.  While the recipients must pay tax on the distribution, if not repaid, they can spread the taxable income over three tax years.  

Additionally, employers may permit larger loans (up to a maximum of $100,000 or 100% of the vested account balance) as part of the qualified disaster distribution.  Typically plan loans, not for the purchase of a principal residence, may not exceed a five-year payoff.  Qualified individuals may be eligible for a delay of certain repayments for up to one year, which is disregarded when calculating the five-year payoff timeframe.    

Lastly, for qualified individuals who received a qualified distribution for the purchase or construction of a principal residence during a specified timeframe surrounding the declared disaster but could not purchase or construct the principal residence due to the qualified disaster, Section 331 allows them to re-contribute that distribution. 

We are available to help plan administrators understand and implement the requirements of SECURE 2.0.  Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.

The Bipartisan Budget Act of 2018 and the Tax Cuts and Jobs Act of 2017 liberalized the hardship distribution rules applicable to 401(k) and 403(b) plans. On September 23, 2019, the IRS issued final regulations — which we discussed in a previous blog — implementing the new hardship distribution rules. While some of the new rules were discretionary, there are several mandatory provisions that will take effect on January 1, 2020, including:

• Plans are prohibited from suspending employee deferral contributions following hardship distributions that occur on or after January 1, 2020; and

• Employees must represent in writing (including electronic representations) that they have insufficient cash or other liquid assets reasonably available to satisfy the need giving rise to hardship distribution requests that are made on or after January 1, 2020.

On December 12, 2019, the IRS issued Rev. Proc. 2020-9, clarifying when 401(k) plans must be amended to comply with the elimination of deferral suspension and written representation rules described above: December 31, 2021 for both individually designed and pre-approved 401(k) plans, which aligns with the deadline the IRS established for non-governmental 403(b) plans in Rev. Proc. 2019-39.

Key Takeaway: Although plan documents do not need to be amended immediately, plan sponsors should ensure that they are in operational compliance with all mandatory hardship distribution rules that become effective on January 1, 2020.

On September 23, 2019, the Treasury Department and IRS published final regulations for hardship distributions from both 401(k) and 403(b) plans (the “Final Regulations”).  Essentially the hardship distributions changes relax the hardship distribution requirements (i.e., making it easier for participants to obtain hardship distributions) and eliminate many burdens following a hardship distribution (i.e., allowing participants the flexibility to contribute to their retirement plan account shortly after obtaining a hardship distribution).

The Final Regulations respond to comments on the earlier proposed regulations issued in November 2018 (see our previous blog here).  As expected, the Final Regulations closely mirror the proposed regulations.  So, any 401(k) or 403(b) plans amended to comply with the proposed regulations will most likely satisfy the Final Regulations.

The Final Regulations make the following required and permissive changes to the hardship distribution requirements:

  • Elimination of 6-Month Suspension – The Final Regulations remove the 6-month suspension rule which prevents participants who have taken hardship distributions from contributing to the plan for 6 months following the hardship distribution.
    • This is a required change on or after January 1, 2020, but a plan may elect to remove the 6-month suspension requirement as early as January 1, 2019.
  • Expansion of Available Hardship Sources to include elective contributions, QNECs, QMACs, safe harbor contributions, and earnings – The Final Regulations remove the restriction against hardship distributions from qualified non-elective contributions (QNECs), qualified matching contributions (QMACs), earnings on these amounts, and earnings on elective contributions no matter when contributed or earned.  But for Section 403(b) plans, the Final Regulations only permit hardship distributions on qualified non-elective contributions (QNECs) and qualified matching contributions (QMACs) that are not in a custodial account (i.e., they are held in an annuity).  For 403(b) plans, earnings on elective deferrals remain ineligible for hardship withdrawal.
    • This is a permissive change. 
  • Elimination of the Plan Loan Requirement – The Final Regulations remove the requirement that participants take all available plan loans before taking a hardship distribution (although participants still must exhaust all other in-service withdrawals available under the plan).
    • This is a permissive change.
  • Creation of a General Financial Need Standard – The Final Regulations eliminate the rule under which the determination of whether a distribution is necessary to satisfy a financial need is based on all the relevant facts and circumstances and provide one general standard for determining whether a distribution is necessary to satisfy an immediate and heavy financial need.  Under this general rule, (1) a hardship distribution may not exceed the amount of the need, (2) the employee must have obtained other available distributions under the employer’s plans, and (3) the applicable employee must represent (in writing, electronically, or in another form permitted by the IRS) that he/she has insufficient cash or other liquid assets to satisfy the immediate and financial need for which the hardship is being sought.  The Final Regulations provide that a plan may provide additional conditions for employees to demonstrate that a distribution is necessary to satisfy an immediate and heavy financial need; however, the Final Regulations do not permit a suspension of elective contributions or employee contributions as a condition of obtaining a hardship distribution.
    • This is a required change for hardship distributions on or after January 1, 2020, and may be a permissive change for hardship distributions as early as of January 1, 2019.
  • Creation of New Safe Harbor Circumstance for Immediate and Heavy Financial Need – The Final Regulations expand the situations deemed to create an “immediate and heavy financial need” to include expenses and losses incurred by the employee because of a federally declared disaster, if the employee’s principal residence or place of employment was in the disaster area at the time of the disaster.  Of note, there is no deadline by which a disaster-related hardship distribution must be made following the federal disaster.
    • This is a permissive change. 
  • Expansion of Safe Harbor Circumstances for Qualified Beneficiary Expenses – The Final Regulations expand the safe harbor circumstances to include qualifying medical, educational, and funeral expenses for a participant’s “primary beneficiary under the plan” (i.e., an individual named as beneficiary under the plan that has an unconditional right upon the participant’s death, to all or a portion of the participant’s account balance under the plan)
    • This is a permissive change. 
  • Clarification of Safe Harbor Circumstances for Casualty Loss Reason – The Final Regulations provide clarification that home casualty losses (under Code Section 165) do not have to be tied to a federal disaster to be eligible for a hardship distribution.
    • This is a permissive change.

Please contact your preferred Jackson Lewis attorney for assistance applying the Final Regulations to your plan and preparing or reviewing necessary amendments.

Earlier this year we reported on legislative changes that modified the requirements related to hardship distributions from 401(k) plans.  Recently, the IRS issued proposed regulations that if finalized will implement those changes.

Background

The Internal Revenue Code (the “Code”) and associated regulations generally place restrictions on participants’ ability to withdraw their elective deferrals from 401(k) plans.  Similar restrictions exist for Section 403(b) plans.

However, there are exceptions to those rules.  One such exception occurs if the plan allows for hardship distributions.  A hardship distribution is a distribution that a participant can take under certain circumstances of immediate and heavy financial need.  A hardship distribution can be taken only if it is necessary to satisfy that need.  Immediate and heavy financial needs include things like certain medical care expenses, the cost to purchase a principal residence, certain tuition and educational expenses, the amount necessary to avoid eviction, certain burial or funeral expenses, and certain expenses to repair damage to a principal residence.

Elective Deferral Restrictions Following a Hardship Distribution

Under current IRS regulations, participants that take hardship distributions generally are not allowed to contribute to the plan for a six-month period following the hardship distribution.  The proposed regulations would remove the six-month suspension rule for hardship distributions that occur on or after January 1, 2020.  In other words, as of that date, plans cannot contain the six-month suspension rule.

The plan would be allowed (but not required) to eliminate the six-month suspension rule as of the first day of the plan’s 2019 plan year.  The removal could be applied retroactively to those who took hardships prior to that date but are still in the six-month suspension period.

Prohibition on Hardship Distributions of Elective Deferral Earnings, QNECs and QMACs

The proposed regulations would remove the rule that prevents hardship distributions from elective deferral earnings, qualified non-elective contributions (QNECs) and qualified matching contributions (QMACs).  This is not a required change, so plan sponsors have the discretion to determine whether and to what extent to adopt these changes.

Section 403(b) plans are more limited in the changes that can be made.  Specifically, a Section 403(b) plan cannot eliminate the restriction preventing hardship distributions from elective deferral earnings, and hardship withdrawals of QNECs and QMACs are only allowed if those amounts are not held in custodial accounts.

Elimination of Plan Loan Exhaustion Requirement

In accordance with changes in the tax laws, the proposed regulations remove the requirement that participants take all available plan loans prior to taking a hardship distribution.  This is a permissive change that plans can adopt for the 2019 plan year and beyond.

Substantiation Requirements

The proposed regulations would require that for hardship distributions that occur on or after January 1, 2020, the applicable employee must represent (in writing, electronically or in another form permitted by the IRS) that he or she has insufficient cash or other liquid assets to satisfy the immediate and financial need for which the hardship distribution is being sought.  The plan administrator would be allowed to rely on this representation absent actual knowledge to the contrary.

Other Changes

As noted above, hardship distributions are only allowed in certain circumstances of immediate and heavy financial need, one of which is for expenses to repair damage to a principal residence that qualifies for a casualty deduction under the Internal Revenue Code.  Recent changes in the tax limit the casualty deduction to expenses related to certain federally declared disasters (through 2025), with the unintended consequence of limiting the situations in which a participant could qualify for a hardship distribution due to home damage.  The proposed regulations would clarify that the new limit on casualty loss deductions would not apply for purposes of hardship distributions.

In addition, the proposed regulations would expand the situations deemed to create an immediate and heavy financial need to include expenses and losses incurred by employees because of a federally declared disaster, if the employee’s principal residence or place of employment was in the disaster area at the time of the disaster.

Plan Sponsor Considerations

Plan sponsors may want to communicate with their third-party record keepers and document providers regarding changes in hardship distribution procedures.  Many employers use volume submitter or prototype plan documents, and many of those document providers are making default changes to the hardship rules of those plans.  Employers may need to determine whether they want to use the provider’s default changes or do something different.  Similarly, sponsors of individually designed plans may also want to speak with their third-party administrators about any changes being contemplated.

The exact date that plan amendments will be required to implement the changes described above is not yet known.  Generally, however, amendments will be required by the end of the second calendar year beginning after the IRS issues its annual “Required Amendments List” that includes changes in the hardship rules.

Plan administrators may also want to consider whether updates are needed to the plan’s summary plan description and other communications documents that describe the plan’s hardship rules, and to election forms and online election pages.

Please contact your preferred Jackson Lewis attorney for assistance in understanding these new rules and how they may affect your plan.

Just a few weeks ago, the federal government avoided a potentially lengthy government shutdown when Congress passed and the President signed into law the Bipartisan Budget Act of 2018 (the “Act”). You may already know that the Act extends funding for the federal government until March 23, 2018. However, what you may not know is that hidden in the Act are provisions that will change some of the rules relating to hardship distributions from 401(k) plans.

Hardship Distributions from 401(k) Plans

The Internal Revenue Code (the “Code”) and associated regulations place restrictions on participants’ ability to withdraw their elective deferrals from 401(k) plans except in certain circumstances (e.g., reaching age 59 ½; termination of employment). One such exception is that a 401(k) plan is allowed to provide for “hardship distributions.” This means that in certain circumstances (and if the plan allows), an active employee participating in a 401(k) plan can withdraw his or her elective deferrals to pay for certain expenses.
Section 401(k) of the Code and the regulations thereunder place a number of rules and restrictions on hardship distributions. For instance, the distribution must be on account of hardship, meaning that it is pursuant to an immediate and heavy financial need and is necessary to satisfy that need. Immediate and heavy financial needs include things like certain medical care expenses, the cost to purchase a principal residence, certain tuition and educational expenses, the amount necessary to avoid eviction, certain burial or funeral expenses, and certain expenses to repair damage to a principal residence.

An employee that takes a hardship distribution is generally prohibited from making elective deferrals to the plan (or any other plan maintained by the employer) for at least 6 months following the hardship distribution. Also, hardship distributions are only permitted from certain accounts. Except for certain grandfathered amounts, they cannot be taken from the participant’s income on elective deferrals, qualified nonelective contributions (“QNECs”) or qualified matching contributions (“QNECs”). Furthermore, before a hardship distribution can occur, the employee must have taken all other available distributions from the plan (and other plans maintained by the employer), such as a loan (if available).

What Changes Does the Act Make to Hardship Distributions?

First, the Act will eliminate the 6-month suspension on elective deferrals following a hardship distribution. It requires the Secretary of Treasury to issue regulations removing the 6-month restriction on elective deferrals. The Secretary has up to one year to complete this task. Furthermore, the Act amends Section 401(k) of the Code to allow for hardship distributions to include QNECs, QMACs, and income on elective deferrals. Lastly, the Act removes the requirement to take available loans before taking hardship distributions. These changes are effective for plan years beginning after December 31, 2018.

What Should Plan Sponsors Do?

Be on the lookout for new regulations and guidance from the Secretary of Treasury, and contact the Jackson Lewis attorney of your choice for assistance. We can help you amend your plan document, and also work with you and your third-party administrators to implement the administrative changes needed for 2019. If your plan does not currently provide for hardship distributions, but you would like to add that option, we can help you with that too.

On February 23 and March 7, 2017, the Internal Revenue Service (“IRS”) issued memoranda to examination agents addressing review of substantiation provided in support of safe harbor hardship distributions under 401(k) and 403(b) plans. Although the memoranda cannot be relied upon as official guidance, they are good reference points to help plan sponsors and third party administrators (“TPAs”) avoid issues on audit.

Hardship Distributions

401(k) and 403(b) plans may allow hardship distributions on account of immediate and heavy financial need of an employee that cannot be satisfied from other sources, including plan loans. The Treasury Regulations provide a safe harbor for certain distributions that — if properly substantiated — will be deemed to be on account of an immediate and heavy financial need, including:

• medical care for the employee or the employee’s spouse, children or dependents;
• purchase of a principal residence;
• payment of tuition, related educational fees, room and board expenses for up to the next 12 months of post-secondary education for the employee or the employee’s spouse, children or dependents;
• payments necessary to prevent eviction of the employee from the employee’s principal residence or foreclosure of the mortgage on that residence;
• payments for burial or funeral expense for the employee’s deceased parents, spouse, children or dependents; or
• expenses for the repair of damages to the employee’s principal residence that would qualify for a casualty deduction.

Memoranda Guidance

In reviewing safe harbor hardship distributions, auditors will review source documents — such as estimates, contracts, bills and statements from third parties — or a summary of the information contained in the source documents. The memoranda’s reference to review of a “summary of information” seems to contemplate — and signal tacit approval of — electronic or streamlined hardship distribution processes, pursuant to which requests do not include submission of source documents, but rather require only the employee’s certified representation concerning the content of, and a promise to preserve, the source documents.

Summary of Information

In order to avoid potential unpleasantries on audit, plans that use an electronic or streamlined hardship distribution request process will need to take certain steps. First, the employer or TPA must provide the employee notice that, inter alia, the distribution is taxable, cannot exceed the immediate and heavy financial need, cannot be made from earnings on elective deferrals and — perhaps most importantly — the employee must agree to preserve the underlying source documents and make them available at any time upon request of the employer or TPA. Second, the summary of information must include, at a minimum, the information specified in the memoranda required to substantiate the hardship distribution in question — for example, a hardship distribution request for funeral expenses should include the name of the deceased, the deceased’s relationship to the employee, the date of death and the name and address of the service provider of the funeral or burial. Third, if a TPA administers hardship distributions, it should provide a report to the employer at least annually that describes the hardship distributions made during the year.

Where a summary of information is incomplete or inconsistent on its face, the auditor may ask the employer or TPA for the source documents. In addition, where an employee has received more than two hardship distributions in a plan year, in the absence of adequate explanation — such as follow-up funeral expenses — and with IRS managerial approval, the auditor may ask to review source documents.

Recommended Next Steps

Review your plan’s hardship distribution procedures and, if applicable, confer with your TPA to ensure compliance with the memoranda. Although the memoranda cannot be relied upon as binding authority, conforming your hardship distribution procedures should go a long way to helping you complete a successful hardship distribution audit.

If you ask, plan administrators will tell you that for every deadline or specified time limit that is imposed by law upon plan participants for taking action with respect to an employee benefit plan, there are always a significant number of participants who come forward with one or more “excuses” why they could not meet the deadline. Often these “excuses” are legitimate. However, only occasionally is there a legally authorized protocol provided to plan administrators and participants which can remedy the circumstance of the missed deadline. Such an occasion occurred on August 24, 2016.

In Rev. Proc. 2016-47, the IRS published guidance to assist participants who, because of certain circumstances of hardship, miss the 60-day deadline for rolling over qualified retirement plan or IRA assets and, without a legally authorized excuse, would otherwise be required to pay additional taxes due on early distributions. Even better, the IRS set forth a protocol for participant “self-help,” which permits plan administrators to accept transfers of plan assets after the 60-day deadline has passed.

The reasons the IRS deems to provide legitimate excuse for missing the 60-day deadline are, in summary:

a) An error by the financial institution in receiving a contribution or distributing assets relating to a contribution;
b) The distribution made by check was lost and not cashed;
c) The distribution was inadvertently deposited to, and left in an account the participant believed was, an eligible retirement plan, but was not;
d) The participant’s residence suffered severe damage;
e) There was a death in the participant’s family, or a serious illness;
f) The participant was incarcerated;
g) A foreign country imposed a restriction which delayed deposit of the participant’s plan assets;
h) There was a delay caused by the postal service;
i) The plan assets intended to be distributed were levied by the IRS, and the IRS later returned the plan assets to the participant; or
j) The distribution of plan assets and the rollover were delayed due to the failure of the distributing party to provide the information needed by the recipient plan or IRA, despite the participant’s “reasonable efforts” to obtain the information.

See Rev. Proc. 2016-47.

A plan participant who has received a prior IRS determination that it will not waive the 60-day time limit as to a particular distribution event is not eligible for the “self-help” offered by Rev. Proc. 2016-47. Otherwise, however, the participant may write a “certification” to a plan administrator or IRA trustee that the participant’s excuse for missing the 60-day deadline for depositing distributed plan assets into another tax-qualified retirement plan or IRA fits within the conditions that permit such delay to be excused as set forth in Section 3.02 of Rev. Proc. 2016-47. The plan administrator or IRA trustee may rely upon such certification, unless the plan administrator or trustee possesses knowledge that the facts recounted in the certification are not accurate or are untrue.

The plan participant may also rely upon the certification in taking a tax position on the participant’s individual tax return. On examination, however, the IRS has authority to challenge the position taken by the participant based upon the written certification. The IRS also has the ability to determine other statutory or regulatory grounds exist that support a waiver of the 60-day rollover time limit.

A plan participant who desires to take advantage of the “self-help” procedure contained in Rev. Proc. 2016-47 can find the IRS’s preferred form for certification, the “Certification for Late Rollover Contribution,” attached as an appendix to the Rev. Proc. Participants who desire to rely upon the certification are advised to deposit their distributed plan assets into an eligible retirement plan or IRA “as soon as practicable” after the event which caused the deposit delay has resolved. As an express “safe harbor,” the participant who makes the deposit within thirty (30) days of resolution of the event that caused the delay described in the certification will be deemed to have made such deposit “as soon as practicable” within the meaning of Rev. Proc. 2016-47.

On March 29, 2022, the House of Representatives passed the Securing a Strong Retirement Act of 2022 (SECURE 2.0, HR 2954).  SECURE 2.0 is a comprehensive bill designed to increase access to retirement savings and includes a variety of provisions that would affect employer-provided retirement plans.

On June 14, 2022, the Senate Health, Education, Labor, and Pensions (HELP) Committee unanimously approved its version of SECURE 2.0, the Retirement Improvement and Savings Enhancement to Supplement Health Investments for the Nest Egg (RISE and SHINE, S. 4354) Act.

RISE and SHINE v. SECURE 2.0

The RISE and SHINE Act builds on SECURE 2.0, with some key differences.  Provisions in the RISE and SHINE Act not in SECURE 2.0 include:

  • Allowing the use of plan assets to pay some incidental plan design expenses;
  • Raising the limit on mandatory cash-out distributions from $5,000 to $7,000; and
  • The inclusion of the Emergency Savings Act of 2022 (the Emergency Savings Act). Under Emergency Savings Act, 401(k) plans could include emergency savings accounts.  Participants could make pre-tax contributions to their emergency savings accounts.  Employers could match those contributions, but the total amount in a participant’s emergency savings account could not exceed $2,500.  Participants could withdraw amounts from their emergency savings accounts generally at any time, without the requirements imposed on hardship withdrawals.

Provisions in SECURE 2.0 not in RISE and SHINE include:

  • Increasing the catch-up contribution limit;
  • Permitting matching contributions on student loan payments; and
  • Raising the required minimum distribution age.

WHAT’S NEXT? 

The Senate Finance Committee anticipates releasing its retirement reform bill by July 4.  The expectation is for the Finance Committee bill and the HELP Committee bill to merge into a final bill, which the Senate will vote on later this year.  The Senate bill will then be reconciled with SECURE 2.0, and both chambers will vote on the combined bill.

We will continue to monitor retirement reform bills as they move through Congress and will have additional updates as information becomes available.  Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.

As COVID-19 continues its upheaval of nearly all aspects of life, retirement plan administration included (see some of our prior discussions here, here, here and here), the Internal Revenue Service recently issued guidance providing additional relief for the sponsors of certain plans.  IRS Notice 2020-52 clarifies requirements for mid-year changes to a safe harbor 401(k) plan that only reduces contributions made on behalf of highly compensated employees (HCEs), and provides temporary relief from certain requirements that would otherwise apply when a plan sponsor chooses to reduce or suspend safe harbor contributions during a plan year.

Contributions and benefits provided under a qualified retirement plan must not discriminate in favor of HCEs.  Certain tests must be run on a plan annually —the Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) tests—to confirm that a plan is non-discriminatory.  Sponsors may instead choose to design their plan as a “safe harbor” plan by providing matching or nonelective contributions to non-HCEs under certain formulas specified under the safe harbor rules.  By doing so, a plan is generally deemed to pass the ADP and ACP tests.  In most cases, the safe harbor provisions of a plan must be adopted before the first day of a plan year and must remain in place for the entire 12-month period that follows.  If a sponsor does wish to make changes during a plan year—in particular, amending the plan to reduce or suspend the safe harbor contributions—they must either be operating at an economic loss or have included language in their annual safe harbor notice that a reduction or suspension may occur mid-year with 30 days’ advance notice.

The IRS recognizes, however, that many plan sponsors are facing unexpected and unprecedented financial hardship this year in light of COVID-19.  Sponsors may not know yet whether they are operating at an economic loss for the year and/or may not have included the requisite language regarding potential changes in their most recent safe harbor notices.  Sponsors may also have difficulty satisfying the timing requirements for suspending safe harbor contributions when doing so immediately is necessary to ensure they can meet their payroll and other financial obligations.

Because of these considerations, Notice 2020-52 clarifies that a mid-year amendment only reducing contributions to HCEs is not a safe harbor contribution change (as safe harbor contributions by definition are only made to non-HCEs), though an updated safe harbor notice is still required.  In addition, a plan may be amended to reduce or suspend safe harbor contributions between March 13, 2020, and August 31, 2020, without requiring economic loss or language in the annual safe harbor notice allowing such a mid-year change.  Such an amendment, regarding nonelective contributions only, may also be made without 30 days’ advance notice, as long as the amendment is effective on a prospective basis and an updated safe harbor notice is provided no later than August 31, 2020.  (Thirty days’ advance notice is still required for changes to safe harbor matching contributions as those contributions may directly affect the amount a participant chooses to defer.)

The relief under Notice 2020-52 also applies to safe harbor 403(b) plans.

If you have questions regarding Notice 2020-52, or any other COVID-19 relief afforded to qualified retirement or other benefit plans, please contact a member of our Employee Benefits practice group.