IRS Notice 2020-52 Makes Midyear Change To Safe Harbor Plans

On June 29, the IRS issued Notice 2020-52, offering welcome relief for plan sponsors that find themselves in a difficult financial situation as a result of the COVID-19 pandemic. The notice allows for the reduction or suspension of safe harbor contributions during the plan year without regard to typical annual requirements. It also addresses whether and how an organization can reduce safe harbor contributions for highly compensated employees (HCEs) only.

Under normal circumstances, and in a normal year, the IRS requires a plan’s safe harbor contribution to remain in effect for the entire plan year. Any suspension or reduction would be allowed only in the event of an economic loss for the plan sponsor or if the annual notice includes a statement to the effect that the plan may be amended during the plan year to suspend or reduce safe harbor contributions. In that case, the plan sponsor would be required to provide all eligible participants with a second notice, explaining the consequences of the amendment, the procedures for changing contribution elections and the effective date of the amendment.

As mentioned, the new notice provides relief to the requirements outlined above and gives plan sponsors a little more flexibility if they opt to amend plans between March 13, 2020 and August 31, 2020 to reduce or suspend safe harbor contributions (either match or non-elective). Plans may be amended for the reduction or suspension of safe harbor non-elective contributions without providing 30 days’ notice to plan participants as long as a notice is provided no later than August 31, 2020 and the amendment is not retroactive. Importantly, the above method and a delay of the participant notice requirement is not allowed for plans reducing or suspending safe harbor matching contributions, since those contributions affect employees’ contribution decisions. In order to reduce or modify a safe harbor match contribution, participants must be given the proper 30-day notice.

The guidance also provides clarification that sponsors can eliminate safe harbor 401(k) contributions for HCEs only and retain the plan’s safe harbor status, provided the safe harbor 401(k) contributions continue to be made for non-highly compensated employees. Note that a reduction or suspension for HCEs would change the content that’s required to be included in a plan’s safe harbor notice, so affected HCEs would have to be given an updated safe harbor notice and an opportunity to change their contribution elections.

Notice 2020-52 should be helpful to plan sponsors who have suspended or reduced, or are considering suspending or reducing, safe harbor matching contributions or safe harbor non-elective contributions in response to the COVID-19 pandemic. If you have any questions or need additional information, please don’t hesitate to reach out to your SD Retirement Solutions representative.


Schneider Downs Wealth Management Advisors, LP (SDWMA) is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC). SDWMA provides fee-based investment management services and financial planning services, along with fee-based retirement advisory and consulting services. Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice. Registration with the SEC does not imply any level of skill or training.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2021 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
Education About Student Loans
Pandemic Costing American Women Now and for 20 Years
ASU 2021-03 – Private Company and Not-For-Profit Updates to Evaluating Goodwill Impairment Triggering Events
Moody's Releases Update on Higher Education Sector
Earnouts in Today’s Environment
HEERF III is Finally Here – A Quick Guide to the Changes for Student Portion
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us
Map of Pittsburgh Office

One PPG Place, Suite 1700
Pittsburgh, PA 15222

[email protected]
p:412.261.3644     f:412.261.4876

Map of Columbus Office

65 East State Street, Suite 2000
Columbus, OH 43215

[email protected]
p:614.621.4060     f:614.621.4062

Map of Washington Office
Washington, D.C.

1660 International Drive, Suite 600
McLean, VA 22102

[email protected]

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.