What is the requirement for amending a plan when using matching safe harbor contributions?

When a plan is utilizing matching safe harbor contributions, it is essential that the plan document be amended before the beginning of the plan year. This requirement ensures that participants are aware of the plan's features and the employer's commitment to making safe harbor contributions. By making the amendment before the start of the plan year, the employer effectively communicates the plan's features and funding strategy to participants, providing greater clarity and compliance with regulatory standards.

Adhering to this timeline helps maintain the safe harbor status of the plan, which is critical for avoiding certain nondiscrimination testing requirements that apply to 401(k) plans. Moreover, this ensures that participants benefit fully from the intended contributions within that plan year. This proactive approach is necessary for safe harbor contributions to be legally valid and beneficial for both the employer and participants.