401k Bailout Needed

In the wake of the financial crisis and the resulting recession, many plan sponsors have been reducing or suspending contributions to their 401k plans. Accordingly, on May 18, 2009 the IRS issued proposed regulations that will permit employers who are experiencing a "substantial business hardship" and who maintain a safe harbor 401(k) plan to reduce or suspend the safe harbor non-elective contribution without losing the tax-qualified status of the 401k. Under the existing regulations, a Safe Harbor 401k Plan using matching contributions has the ability to reduce or suspend the 401k match at any time during the plan year. However, the existing regulations do not permit a plan sponsor maintaining a Safe Harbor 401k Plan, with non-elective contribution method, to reduce or suspend the safe harbor non-elective contribution during the plan year. However the IRS has stated that the 401k plan will not be exempt from the top-heavy rules. On one hand the government is allowing the companies to suspend the 401k match, as they do not have the money. Yet on the other hand, they are forcing them to make a 401k contribution, which is normally larger than the match. 401ks need to be bailed out by the Government. They need to suspend the Top Heavy Rules so that companies with a substantial business hardship can recover.