On January 29, 2016, the Internal Revenue Service (IRS) released Notice 2016 - 16 , which provides, effective immediately, significant relief with respect to the ability of a plan sponsor to make midyear changes to a safe harbor plan under Sections 401(k) and 401(m) of the Internal Revenue Code.

A 401(k) plan that meets IRS requirements for a safe harbor plan does not have to perform actual deferral percentage nondiscrimination testing (401(k) testing) and, in some cases, actual contribution percentage nondiscrimination testing (401(m) testing). Safe harbor plan sponsors are required to provide employees with a safe harbor notice setting forth specific information about the plan, including an explanation of how contributio ns will be allocated. This safe harbor notice must be provided to each new employee and also must be provided to all eligible employees 30 to 90 days prior to the beginning of each plan year.