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.
This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic.
If you find a broken link or an items that you feel is outdate, irrelevant or no longer appropriate, please let us know.
Many companies have to reduce their expenses and improve cash flow in reaction to the current volatility in the economy due to Covid-19. A number plan sponsors are asking if it is permissible to suspend or reduce required safe-harbor contributions during the plan year. An employer can reduce or suspend its safe harbor contributions during a plan year, but only if certain conditions are met.
Source: Wagnerlawgroup.com, March 2020
Under limited circumstances, and according to final Treasury Regulations, a sponsor of a 401k safe harbor plan may amend the plan during the current year to reduce or suspend the company's safe harbor contribution, either the matching or nonelective contribution. Under what circumstances, if any, may a company reduce or eliminate the mandatory safe harbor contribution during the plan year?
Source: Retirementlc.com, March 2020
The SECURE Act eases some of the regulation of 401k safe harbor plans (which are exempt from certain nondiscrimination testing) to provide employer flexibility and make those plans more attractive.
Source: Huschblackwell.com, March 2020
Section 103 of the SECURE Act amends the Internal Revenue Code regarding the deadline for an employer to elect safe harbor status and eliminates the requirement for a safe harbor nonelective notice. Under the Act, employers will be given additional flexibility on the timing for electing a safe harbor nonelective contribution.
Source: Consultrms.com, January 2020
The article is an answer to this question, "Is there a way to structure the plan so that the company contribution for the HCEs is optional while still maintaining the safe harbor status?"
Source: Dwc401k.com, October 2019
Although the greatest burden imposed on a plan sponsor who elects a safe harbor 401k plan design feature is usually perceived to be the funding of the safe harbor contribution, there are many other administrative requirements that must be satisfied in order to qualify for the ADP / ACP exemption. One such requirement relates to the plan year of a safe harbor 401k plan.
Source: Legacyrsllc.com, August 2019
A Safe Harbor 401k can seem like an obvious choice, but it may not be the best option for every plan. Safe Harbor plans are a great fit for small businesses (particularly those with under 25 employees) and businesses that have failed noncompliance testing in the past. But while you save in administrative hassle, you may pay a bit extra in plan costs and required contributions.
Source: Myubiquity.com, June 2019
Human resources departments are working to follow either a calendar or fiscal year plan of important notices, paperwork, and changes for employees. Is it possible, then, to make a change mid-year and implement a match safe-harbor 401k plan?
Source: Hallbenefitslaw.com, June 2019
In general, there are two broad categories of company contributions to a 401k plan -- a match and a nonelective (a/k/a profit sharing) contribution -- and it is not uncommon for the two terms to be used interchangeably even though the contribution types are quite different. You may now be wondering whether one type of safe harbor contribution is better or worse than the other. The answer really depends on what the company is hoping to achieve with its retirement plan as well as the budget for making contributions.
Source: Dwc401k.com, June 2019
In 1999, the "safe harbor" plan design became available to help solve the failed Average Deferral Percentage (ADP) tests issue for plan sponsors. They have been sold as the only answer to this issue, but often a safe harbor plan design is unnecessary. The only problem it solved was the lack of creativity on the part of the individuals who designed the plan.
Source: Fmgsuite.com, May 2019
If your business is considering implementing a 401k plan for your employees, or changing the plan provided, the alternatives are to either offer a traditional 401k or look at alternative options using the safe harbor provision. This can be a complicated decision as it combines both laws and regulations surrounding plan offerings as well as your businesses priorities.
Source: Hallbenefitslaw.com, May 2019
There is a common misconception that safe harbor plans are exempt from testing requirements. This overly general and inaccurate statement calls for a proper explanation. A safe harbor plan requires tests other than non-discrimination, entails proper administration to satisfy the plan design and can benefit from testing for plan optimization.
Source: Rpgconsultants.com, March 2019
If you're a business owner, you want to know when a safe harbor or traditional 401k plan is best for your company. To make an informed decision, you need to know two things: 1) if your plan will fail ADP/ACP or top heavy tests and 2) if safe harbor status will compromise your ability to meet plan priorities.
Source: Employeefiduciary.com, March 2019
A key regulation for most 401k plans is subjecting workers to nondiscrimination tests each year to prove a plan doesn't unfairly favor certain employees. A Safe Harbor 401k allows employers the opportunity to cut through the complexity. By setting one up, a business can provide its employees with the same tax benefits as a regular 401k plan but skip the onerous annual testing.
Source: Usnews.com, January 2019
A safe harbor 401k plan is a type of tax-deductible 401k plan that ensures all employees at a company have some set of minimum contributions made to their individual 401k plans, regardless of their title, compensation, or length of service. A major perk of this plan is that it also helps companies pass IRS non-discrimination testing.
Source: Humaninterest.com, August 2018
There are laws. There are regulations. There are a million different ways to design a 401k. You might've heard that Safe Harbor can be a good plan design, but you're probably wondering: what the heck is a Safe Harbor 401k? This article will walk you through everything you need to know to decide if a Safe Harbor 401k is right for your business.
Source: Forusall.com, July 2018
A safe harbor 401k plan is a type of tax-deductible 401k match that companies use to help themselves pass IRS non-discrimination testing. Safe harbor plans mean that all eligible employees in the company are entitled to the same match, regardless of their title, compensation, or length of service.
Source: Humaninterest.com, July 2018
This article discusses qualifying requirements and the types of employer contributions when designing a Safe Harbor 401k plan.
Source: Boutwellfay.com, June 2018
According to a 2016 study by SHRM, 68% of 401ks are safe harbor plans. But while the rules are straight forward and the benefits are significant, there are still see many plans which have not yet implemented a safe harbor match of any kind. This article exploreS the requirements and share some examples of safe harbor plans.
Source: Belr.com, February 2018
This chart compares a SEP with a safe-harbor 401k plan and is especially important for employers who must cover participants other than just the owners.
Source: Consultrms.com, December 2017
Employers sponsoring Safe Harbor 401k plans must satisfy certain notice requirements. The notice requirements are satisfied if each eligible employee for the plan year is given written notice of the employee's rights and obligations under the plan and the notice satisfies the content and timing requirements.
Source: Qbillc.com, December 2017
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