The IRS has issued guidance on certain provisions of the SECURE Act that affect safe harbor plans, including safe harbor 401(k) plans and certain 403(b) plans.

A safe harbor 401(k) plan is similar to a traditional 401(k) plan but is structured in a way that certain compliance testing can be avoided. Among other things, a safe harbor 401(k) plan must provide for employer contributions that are fully vested when made. These contributions may be employer matching contributions, limited to employees who defer, or employer contributions made on behalf of all eligible employees, regardless of whether they make elective deferrals.

Notice 2020-86, provides, in QA format, guidance on Sections 102 and 103 of the SECURE Act. Section 102 increases the 10 percent cap for automatic enrollment safe harbor plans. Section 103 eliminates certain safe harbor notice requirements for plans that provide for safe harbor nonelective contributions and adds new provisions for the retroactive adoption of safe harbor status for those plans.

The notice is intended to provide guidance while the Treasury Department and the IRS develop further regulations regarding the SECURE Act.