IRS Finalizes Safe Harbor Rules for Employers Facing Business Hardships

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Employers operating at an economic loss are permitted to suspend or reduce nonelective contributions made to safe harbor tax code Section 401(k) plans midyear, the Internal Revenue Service said in newly issued final regulations (T.D. 9641).
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 nonelective contributions to the plans, Jan Jacobson, senior counsel for retirement policy at the American Benefits Council, told Bloomberg BNA Nov. 14.
“We don't have the same financial stresses now, so I would suspect” fewer employers will use these rules than would have earlier, “but it is good to have in place for, if you're an employer and you're operating at an economic loss, then that may be that you want to eliminate those contributions, because you're trying to stay in business,” Jacobson said.

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