December 11, 2020


On December 9, 2020, the IRS issued Notice 2020-86 addressing certain provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) affecting certain safe harbor plans. This notice provides guidance in the form of questions and answers with respect to Sections 102 and 103 of the SECURE Act, and it is intended to assist employers while the Treasury Department and IRS develop regulations to fully implement these provisions. Below is a high-level overview of Sections 102 and 103 of the SECURE Act and some of highlights of the guidance included in Notice 2020-86.

Section 102 of the SECURE Act generally increases the maximum automatic elective deferral percentage under an automatic enrollment safe harbor plan from 10% to 15%. With respect to Section 102, this Notice includes the following guidance:

  • A qualified automatic contribution arrangement (QACA) safe harbor 401(k) plan is not required to increase the maximum elective deferral percentage provided under the plan in order to maintain its qualified plan status.
  • A plan that incorporates by reference the maximum elective deferral percentage under the Internal Revenue Code may needed to be amended to provide an explicit maximum percentage, if the employer does not intend to use the new 15% maximum. The amendment deadline is generally December 31, 2022 for non-governmental plans, and December 31, 2024 for governmental or collectively bargained plans.

Section 103 of SECURE Act eliminates certain safe harbor notice requirements for plans that provide safe harbor nonelective contributions and adds new provisions for the retroactive adoption of safe harbor status for those plans. With respect to Section 103, this Notice includes the following guidance:

  • The SECURE Act did not alter the notice requirements for plans that use safe harbor matching contributions.
  • To retain the ability to reduce or suspend safe harbor nonelective contributions during the plan year, a plan must still satisfy the requirements outlined in the Treasury regulations, include providing some type of notice to employees.
  • An amendment to adopt a nonelective contribution safe harbor design can be adopted any time before the last day for distributing excess contributions for the plan year, if the nonelective contributions are at least 4% of each employee’s compensation.

The full text of IRS Notice 2020-86 is available at

Judy Burdg is an ERISA attorney whose practice encompasses a broad range of employee benefits matters involving retirement plans, health and welfare plans, and executive compensation.

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