COLLECTED WISDOM™ On Safe Harbor 401k Retirement Plans

As a general rule, 401k plan must satisfy certain non-discrimination requirements. Many small businesses find this hard to do and, as a result, many don't set-up such plans. The Small Business Job Protection Act of 1996 provided 401k plans with alternative, simplified methods of meeting the non-discrimination requirements. 401k plans that adopt one of these alternative methods are referred to as "safe harbor 401k" plans.

Here is information to help you understand Safe Harbor 401k plans.

Retirement Plan Comparison Chart - Revised and Updated - Summary: Popular retirement plan aid that contrasts and compares the features of the following define contribution plans: 401k, Solo 401k, Safe Harbor 401k, SIMPLE 401k, Profit Sharing, SEP IRA, and SIMPLE IRA. Located at: 401khelpcenter.com, January 2008. Click on headline for full article.

Safe Harbor 401k Notice Rules - Summary: What are the requirements for providing a brand-new plan with a safe harbor notice? What about providing that notice to a brand-new employee? Located at: McKay Hochman, May 2007. Click on headline for full article.

Safe Harbor 401k Chart - Summary: These are some of the basics that an employer needs to know before considering a 401k Safe Harbor Plan. Each employer's goals, plan design, contribution sources and demographics from a unique scenario which the employer will wish to discuss with his or her plan provider before finalizing the decision to make the plan a 401k Safe Harbor Plan. Located at: McKay Hochman, February 2007. Click on headline for full article.

Safe Harbor 401k Discretionary Match - Summary: The final regulations state that, to remain exempt from ACP testing, all matching contributions must be allocated on a nondiscriminatory basis. Placing an allocation restriction, such as a last-day rule or a 1,000 hours-of-service requirement, on any matching contribution provided by the plan is discriminatory unless all non-highly compensated participants satisfy the restrictions. Located at: McKay Hochman, October 2005. Click on headline for full article.

Exceptions to the Safe Harbor 401k Plan's 12-Month Plan Year Requirement - Summary: Under the original safe harbor plan rules, the only short plan year allowed for safe-harbor plans was the first plan year. Unless an employer organization was in existence less than three months, the first plan year had to be at least three months long. The Final Regulations have added additional opportunities to use a short-plan year (a plan year of less than 12 months) for safe-harbor plans. Located at: McKay Hochman, October 2005. Click on headline for full article.

Safe Harbor 401k Plans for 2005 - Summary: Safe harbor plan designs are perfect for many employers because they eliminate testing and permit the highly compensated employees to maximize contributions. However, some employers may be reluctant to abandon vesting schedules and 1000 hour/last day rules for entitlement to matching or nonelective contributions. Clearly, each employer’s expectations, finances and demographics are unique and they should be carefully weighed before committing to a safe-harbor plan. Located at: McKay Hochman, November 2004. Click on headline for full article.

Safe Harbor 401k Plans: When Are They Exempt from Top Heavy? - Summary: In Revenue Ruling 2004-13, the IRS explains the exemption from the "top heavy" rules for a plan that consists solely of a safe harbor 401k arrangement. Located on: Reish Luftman Reicher & Cohen, March 2004. Click on headline for full article.

Our 401k Safe Harbor Just Got Bigger - Summary: For those of you who have been thinking about adopting a safe harbor design for your company’s 401k plan but have not yet jumped on board or set sail, the IRS has issued additional guidance in the form of Notice 2000-3, which may just convince you to drop anchor in the safer and simpler waters of a 401k safe harbor design. Located on: Chang Ruthenberg and Long PC, January 2004. Click on headline for full article.

Safe Harbor 401k Examples - Summary: McKay Hochman often receive calls asking whether certain matching contribution formulas may be used in a safe harbor 401k plan. Following are a number of different examples from the inquiries they have received. Located on: McKay Hochman, September 2004. Click on headline for full article.

Should You Consider Using A 401k Safe-Harbor Plan? - Summary: Safe-harbor 401k plans offer many advantages that some employers will gladly embrace. For other employers, the cost involved may be prohibitive. Either way, an understanding of the rules makes an informed decision possible. Adopting a safe harbor 401k plan design permits an employer to avoid discrimination testing of the rates of employee elective deferrals and/or employer matching contributions (ADP/ACP testing). The price for avoiding testing is a safe harbor contribution. Located on: McKay Hochman, December 2003. Click on headline for full article.

Safe Harbor 401k Chart - Summary: Each employer's goals, plan design, contribution sources and demographics form a unique scenario which the employer will wish to discuss with his or her plan provider before finalizing the decision to make the plan a 401k safe harbor plan. Here are some of the basics that an employer needs to know before considering a 401k safe harbor plan. Located on: McKay Hochman, December 2003. Click on headline for full article.

Limiting Compensation for HCEs in Safe Harbor Plans - Summary: Can a safe harbor match 401k plan limit the compensation only for HCE salespersons? Located on: Reish Luftman Reicher & Cohen, March 2004. Click on headline for full article.

Comparison Chart - Summary: A chart that compares a Safe Harbor 401k Plan with a traditional 401k plan. Located on: R. Bruce Tanner & Associates, Inc. , December 2003. Click on headline for full article.

IRS Notice 2000-3 on Safe Harbor 401k Plans - Summary: This notice provides additional guidance regarding 401k plans that are intended to satisfy the 401k safe harbors. This guidance responds to comments and suggestions regarding ways to make it easier for employers both to adopt and to administer 401k safe harbor plans. Located on: 401khelpcenter.com, December 2003. Click on headline for full article.

IRS Notice 98-52 on Safe Harbor 401k Plans - Summary: This notice provides guidance on the design-based alternative or "safe harbor" methods in section 401k(12) and section 401(m)(11) of the Internal Revenue Code for satisfying the section 401k and section 401(m) nondiscrimination tests. Located on: 401khelpcenter.com, December 2003. Click on headline for full article.

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