TO
ALL ELIGIBLE EMPLOYEES OF THE
______[insert name of safe harbor 401(k)plan]
Notice of 401(k) SafeHarbor Election
(Plan Year beginning ______, 20__)
______, 20__ [date of issuance should be at least 30and no more than 90 daysbefore beginning of next plan year]
Effective for the Plan Year beginning ______, 20___, the ______(the “Plan”) will [continue to] operate as a SafeHarbor 401(k) Plan.
What Are the Contributions Under this Plan?
There are [three] [two] types of contributions that can be made under the Plan: (i) contributions that you authorize the Company to contribute on your behalf on a before-tax basis (“Before-Tax Contributions); (ii) contributions the Company will make on behalf of all Participants under the Plan without regard to whether a Participant makes Before-Tax Contributions (“Company Safe Harbor Nonelective Contributions”); and (iii) discretionary contributions that the Company may elect to make or not make for each Plan Year (“Company Profit Sharing Contributions”).
How do I make Before-Tax Contributions to the Plan?
This Plan offers you the flexibility of contributing [1% or more (in whole percentages only)] of your Compensation [not to exceed ______] to the Plan on a before-tax basis. For this purpose, your Compensation means compensation as defined in your most recent Summary Plan Description as modified by any issued Summaries of Material Modification including the limitations on the maximum amount of Compensation that can be counted under the Plan.
In order to elect to make Before-Tax Contributions, you must complete the attached Enrollment Form and submit it to the Plan Administrator at least [______(__) days (or such shorter period as may be prescribed by the Plan Administrator)] before the effective date of the contribution election. The effective date of your election will be ______.
In addition, the following administrative requirements and rules apply with respect to your Before-Tax election including restrictions on how frequently you can change your election:
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How much can I contribute to the Plan?
The federal government imposes restrictions on the maximum Before-Tax Contribution
which you can contribute to the Plan in any calendar year. For the ____ calendar year, that limitis $______. The maximum limit is scheduled to rise in the future based upon increases in the cost of living.
In addition to the dollar limits described above, as described in your most recent Summary Plan Description, certain Participants may also be eligible to make additional contributions known as Catch-Up Contributions.
Is the Company required to make any Contributions to the Plan?
Yes. Starting ______, 20__, and thereafter, for each Plan Year that you receive a Notice, prior to the beginning of the Plan Year, like this one specifying that the Company has elected to be treated as a Safe Harbor Plan and to make a Safe Harbor Nonelective Contribution, the Company will contribute a Safe Harbor Nonelective Contributionto the Plan on behalf of each eligible Participant without regard to whether you elect to make Before-Tax Contributions to the Plan for the Plan Year. The amount of the Company’s Safe Harbor Nonelective Contribution will equal 3% of each eligible Participant’s Compensation under the Plan. The term Compensation means compensation as defined in Section ______of your most recent Summary Plan Description)
This Safe Harbor Nonelective Contribution is mandatory for any Plan Year that the Plan notifies you that it will be treated as a Safe Harbor Plan and that the Company will make a Safe Harbor Nonelective Contribution for the upcoming Plan Year.
The Company Safe Harbor Nonelective Contribution will be immediately and 100% Vested when contributed to your account. This means that if you leave employment with the Company for any reason, not only will your Before-Tax Contributions belong to you, but the Company Safe Harbor Nonelective Contribution allocated to your account will as well. However, like your Before-Tax Contributions, Company Safe Harbor Nonelective Contributions cannot be distributed while you remain employed with the Company and an active Participant in the Plan. Generally, such amounts can only be distributed upon your termination of employment due to your death, retirement or for other reasons.
Will the Company make any contributions other than the SafeHarbor Nonelective Contribution?
The Company is also authorized, but not required, to make a Company Profit Sharing Contribution. This contribution is described in detail in the most recent Summary Plan Description for the Plan. The Profit Sharing Contribution continues to be a discretionary contribution. This means that whether a contribution will be made for a Plan Year, and, if so, in what amount is determined each Plan Year by the Board of Directors of the Company.
This contribution, like the Company’s Safe Harbor Nonelective Contribution, is described in detail in the most recent Summary Plan Description for the Plan. (Specifically, see ______of the Summary Plan Description).
How will I know whether the Company will make SafeHarbor Nonelective Contributions for the Plan Year?
Within a reasonable period of time prior to the beginning of each Plan Year for which the Company will contribute a Safe Harbor Nonelective Contribution, the Plan Administrator will provide you with a Notice advising you that the Plan has made the election to be treated as a Safe Harbor Plan and the Company will contribute the Safe Harbor Nonelective Contribution.
Generally, this Notice will be provided within 30 to 90 days prior to the beginning of each Plan Year. If you are not a Participant at the beginning of a Plan Year, however, when the Notice is provided, you will nevertheless be provided with the Notice.
Does the fact that the Company has elected SafeHarbor Status bind it to provide SafeHarbor Nonelective Contribution for subsequent Plan Years?
No. The fact that the Company has currently elected that the Plan be treated as a Safe Harbor Plan for a Plan Year in no way binds the Company to continue this status for the Plan for future Plan Years.
Vesting and Withdrawal Rules
What Vesting rules apply to Before-Tax Contributions and Company Safe Harbor Nonelective Contributions?
This Plan is adopted in order to assist long-term Employee Participants in planning for and providing for their retirement. The part of your account that you have earned and that you will never forfeit is known as your Vested account. The process by which you earn this Vested interest in all or a portion of your account is called Vesting. You are always 100% Vested and nonforfeitable in both your Before-Tax Contributions as well as the Company Safe Harbor Nonelective Contributions allocated to your account.
Any Company Profit Sharing Contributions allocated to your account will Vest in accordance with the rules described in the most recent Summary Plan Description for the Plan. You should consult Section ____ of your Summary Plan Description.
Generally, no portion of your account, including Before-Tax Contributions, Company Safe Harbor Nonelective Contributions and other contributions can be distributed except after your termination of employment due to your death, retirement or for certain other reasons. Please consult your Summary Plan Description at Section ___ for the rules governing distributions from the Plan.
If you still have questions
If you have questions regarding this Notice or your rights and the benefits under the Plan, you may contact the Plan Administrator’s designee at the following address and/or telephone number:
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