2017-11-09_SS_1545-2191r

SUPPORTING STATEMENT

Internal Revenue Service

Reduction or Suspension of Safe Harbor Contribution

TD 9641 – REG-115699-09

OMB Control No. 1545-2191

1. CIRCUMSTANCES NECESSITATING THE COLLECTION OF INFORMATION

Section 401(k)(3)(A)(ii) sets forth a special nondiscrimination test for 401(k) plans. Section 401(k)(12) provides a safe harbor alternative to the regular 401(k) nondiscrimination test. Section 401(m)(2)(A) sets forth a special nondiscrimination test for matching contributions made in a defined contribution plan. Section 401(m)(11) provides an alternative way to satisfy the nondiscrimination requirements of section 401(m((2)(A).

One of the requirements of the safe harbor alternative is to furnish either matching contributions or nonelective contributions to employees. The final regulations allow an employer to reduce or suspend safe harbor nonelective contributions or matching contributions if it is operating at an economic loss described in section 412(c)(2)(A) for the plan year.

The final regulations permit an employer to reduce or suspend safe harbor nonelective contributions without regard to the financial condition of the employer if notice is provided to participants before the beginning of the plan year which discloses the possibility that the contributions might be reduced or suspended mid- year. The notice must also provide that a supplemental notice will be provided to plan participants if a reduction or suspension does occur and that the reduction or suspension will not apply until at least 30 days after the supplemental notice is provided. These provisions are found in 1.401(k)-3(g)(1)(ii)(A)(2) and 1.401(k)-3(g)(ii)(B).

The final regulations also permit matching contributions to be reduced or suspended under a mid-year amendment if the notice provided to participants before the beginning of the plan year discloses that the contributions might be reduced or suspended mid-year, that participants will receive a supplemental notice if that occurs, and that the reduction or suspension will not occur until at least 30 days after the supplemental notice is provided. These provisions are found in 1.401(k)-3(g)(1)(i)(A)(2) and 1.401(k)-3(g)(1)(i)(B).

The regulations affect administrators of, employers maintaining, participants in, and beneficiaries of certain defined contribution plans that satisfy the nondiscrimination tests of section 401(k) and section 401(m) using one of the design-based safe harbors.

2. USE OF DATA

The notice furnished to employees will inform them that their employer will reduce or eliminate safe-harbor non-elective contributions.

3. USE OF IMPROVED INFORMATION TECHNOLOGY TO REDUCE BURDEN

IRS Publications, Notices, and letters are to be electronically enabled on as practicable basis in accordance with IRS Reform and Restructuring Act of 1998.

4. EFFORTS TO IDENTIFY DUPLICATION

The information obtained through this collection is unique and is not already available or use or adaption from another source.

5. METHODS TO MINIMIZE BURDEN ON SMALL BUSINESSES OROTHER SMALL ENTITIES

It is certified that the collection of information in these final regulations will not have a significant economic impact on a substantial number of small entities. This certification is based upon the fact that small employers that take advantage of the provisions in these regulations will likely see a modest reduction in the cost of providing pensions to their employees.

6. CONSEQUENCES OF LESS FREQUENT COLLECTION ON FEDERAL PROGRAMS

The information required is needed to verify compliance with Section 401 (k) and 401 (m) of the Treasury Regulations. A less frequent collection of taxes and tax information could adversely affect the government’s effectiveness and would reduce the oversight of the public in ensuring compliance with Internal Revenue Code and hinder the IRS from meeting its mission.

7. SPECIAL CIRCUMSTANCES REQUIRING DATA TO BE INCONSISTENT WITH GUIDELINES IN 5 CFR 1320. 5(d)(2)

There are no special circumstances requiring data collection to be inconsistent with Guidelines in 5 CFR 1320.5(d)(2).

8. CONSULTATION WITH INDIVIDUALS OUTSIDE OF THE AGENCY ON AVAILABILITYOF DATA, FREQUENCY OF COLLECTION, CLARITY OF INSTRUCTIONS AND FORMS AND DATA ELEMENTS

In response to the Federal Register notice published August 14, 2017, at 82 FR 37987, for the renewal of this information collection, we received no comments.

9. EXPLANATIONOF DECISION TO PROVIDE ANY PAYMENT OR GIFT TO RESPONDENTS

No payment or gift has been provided to any respondents.

10. ASSURANCE OF CONFIDENTIALITY OF RESPONSES

Generally, tax returns and tax return information are confidential as required by 26 USC 6103.

11. JUSTIFICATION OF SENSITIVE QUESTIONS

The notice is furnished to employees by the employer and will inform them that their employer will reduce or eliminate safe-harbor non-elective contributions. No personal identifiable information (PII) is collected by the agency.

12. ESTIMATED BURDEN OF INFORMATION COLLECTION

The collection of information is in §1.401(k)–3(g)(2) and §1.401(m)–3(h)(2). The collection of information relates to the new supplemental notice requirements in the case of a reduction or suspension of safe harbor non-elective or matching contributions and the requirement to include additional information in the notice required for certain plans that would be permitted to reduce or suspend safe harbor non-elective or matching contributions for a plan year even if the employer had not experienced a business hardship.

We estimate 5,000 employers will wish to reduce or suspend safe harbor non-elective contributions. We estimate it will take each employer two hours to inform its employees about this change. Total burden is 10,000 hours.

Authority	Description	# of Respondents/Recordkeepers	# Responses per Respondent Recordkeeper	Annual Responses	Hours per Response	Total Burden
§1.401(k)–3(g)(2) and §1.401(m)–3(h)(2)	Employers who wish to reduce or suspend safe harbor non-elective contributions	5,000	1	5,000	2 hours	10,000 hours
Totals		5,000	1	5,000		10,000 hours

13. ESTIMATED ANNUAL COST TO RESPONDENTS

To ensure more accuracy and consistency across its information collections, IRS is currently in the process of revising the methodology it uses to estimate burden and costs. Once this methodology is complete, IRS will update this information collection to reflect a more precise estimate of burden and costs. .

14. ESTIMATED ANNUALIZED FEDERAL COST TO FEDERAL GOVERNMENT

To ensure more accuracy and consistency across its information collections, IRS is currently in the process of revising the methodology it uses to estimate burden and costs. Once this methodology is complete, IRS will update this information collection to reflect a more precise estimate of burden and costs.

15. REASONS FOR CHANGE IN BURDEN

There is no change in the paperwork burden previously approved by OMB.

16. PLANS FOR TABULATION, STATISTICAL ANALYSIS AND PUBLICATION

There are no plans for tabulation, statistical analysis, and publication.

17. REASONS WHY DISPLAYING THE OMB EXPIRATION DATE IS INAPPROPRIATE

We believe that displaying the OMB expiration date is inappropriate because it could cause confusion by leading taxpayers to believe that the regulation sunsets as of the expiration date. Taxpayers are not likely to be aware that the Service intends to request renewal of the OMB approval and obtain a new expiration date before the old one expires.

18. EXCEPTION TO THE CERTIFICATION STATEMENT

There are no exceptions to the certification.

Note: The following paragraph applies to all of the collection of information in this submission:

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax return and tax return information are confidential, as required by 26 U.CS.C. 6103.

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