Safe Harbor Plan Design Review

Safe harbor is a great concept that allows your plan to automatically pass the required annual 401(k)/401(m) Discrimination and Top Heavy Testing by making a 100% vested safe harbor contribution.  There are three types of safe harbor that can be utilized, which are listed below.   For Calendar year plans, we will be preparing the coming year's safe harbor notices in November.  If you would like to discuss the safe harbor feature, change or remove safe harbor for the coming year, please contact your ARS Plan Administrator before November 10th.   

Safe Harbor Non-Elective 3% Contribution - Under this option every eligible plan participant must receive an employer contribution equal to 3% of their compensation.  This contribution can be used in conjunction with a cross-tested profit sharing contribution.

Safe Harbor Match Contribution - Under this option the employer will give an employer match contribution to a participant who deferes compensation as 401(k) contributions, or as Roth 401(k) contributions if applicable.  The employer contribution will match the participant's 401(k) contribution using a formula of at least: 100% match on the first 3% and 50% match on the next 2% of compensation deferred.

Maybe Safe Harbor Non-Elective 3% contribution - Under this option the employer has until 30 days before the end of the plan year to confirm whether it will adopt safe harbor or not for the current plan year.  A notice is given to participants 30 days prior to the start of the plan year stating that a contribution may be made.  A second notice will be provided 30 days prior to the end of the plan year if the election is Yes.  A second notice does not apply if the election is No.  The highly compensated and key employees normally do not make employee 401(k) contributions until the company decides if it is going to elect Yes or No for safe harbor for the plan year.


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