IRS Allows Suspension of Plan Contributions

The IRS has come up with some new rules to "ease the pain" of these dire economic conditions and has issued some proposed regulations allowing employers to reduce or suspend their 401(k) or 403(b) safe harbor nonelective contributions mid-year in the case of a "substantial business hardship described in section 412(c) [of the Internal Revenue Code]." The IRS notes in the preamble to the proposed regulations (in today's Federal Register) that the new rules will "provide an employer an alternative to the option of terminating the employer's safe harbor plan in such a situation." The IRS does require 30-day advance notice.