What is a Safe Harbor 401k Plan?
Only If you have employees may you need a Safe Harbor 401k plan. You may need such a plan if the owners (individuals with more than 5% ownership) and the highly compensated employees (HCE’s) (employees making more than $95,000 per year) put in a disproportionate amount of money into the 401k plan compared to the non-owner employees and the non-highly compensated employees (NHCE’s). You can achieve a Safe Harbor plan by making employer contributions on behalf of all non-highly compensated employees. (Under a Safe Harbor plan, 100% of all employer contributions are immediately vested).
Only If you have employees may you need a Safe Harbor 401k plan. You may need such a plan if the owners (individuals with more than 5% ownership) and the highly compensated employees (HCE’s) (employees making more than $95,000 per year) put in a disproportionate amount of money into the 401k plan compared to the non-owner employees and the non-highly compensated employees (NHCE’s). You can achieve a Safe Harbor plan by making employer contributions on behalf of all non-highly compensated employees. (Under a Safe Harbor plan, 100% of all employer contributions are immediately vested). To satisfy the Safe Harbor rules, you may elect to provide either of the following contributions: 1) A dollar for dollar match on elective contributions up to 3% of compensation and 50 cents on the dollar match on elective contributions between 3 percent and 5 percent of compensation (the basic matching formula). (This is for all eligible and participating employees who are actually contributing.) 2) A 3 p
