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.

Failure to Make Safe Harbor Contribution: A Common Mistake in 401k Plans

Many companies opt for a safe harbor 401k because of its tax advantages and talent attraction capabilities. However, failure to make safe harbor contributions may result in penalties and legal repercussions for small businesses. If your company has missed these contributions, promptly addressing the oversight is crucial. This guide will walk you through safe harbor 401k requirements and offer strategies to maintain compliance and prevent future failures.

Source: Forusall.com, March 2024

How to switch From a SIMPLE IRA to a Safe Harbor 401k -- SECURE 2.0 Made It Easier

Small businesses with a SIMPLE IRA may want to switch to a Safe Harbor 401k due to the higher contribution opportunities and flexible plan design options. The passage of the Secure 2.0 Act of 2022 has made it easier for employers to make this switch. Here is a short review.

Source: Conradsiegel.com, March 2024

401k Safe Harbor Rules - 2024

A description of the 401k safe harbor rules, as well as, the advantages and disadvantages of this plan design option. Updated for 2024.

Source: Consultrms.com, January 2024

Safe-Harbor Leveraging for Small Business, Top-Heavy Retirement Plans - 2024

Many employers are debating how to most efficiently take advantage of the defined contribution limit increase to $69,000. However, few owners of small businesses are aware of the extent to which certain types of "leveraging" are now permitted in qualified retirement plans. The purpose of this article is to illustrate the provisions that allow owners of small businesses to get the most in return for what they are willing to contribute on behalf of their non-owner employees.

Source: Consultrms.com, January 2024

Missed the Safe Harbor Deadline? You've Still Got Options

If on a fiscal year, the rule is that the plan must be in effect for at least three months for the safe harbor provision to be valid. You'd like a safe harbor provision but it is too late this year to include it with your new 401k plan. There are still options for you and this article may help you decide how you'd like to proceed.

Source: Benefit-Resources.com, October 2023

QACA Safe Harbor 401k Plans: A Simple Guide for Business Owners

QACA Safe Harbor Plans combine lower match requirements, automatic enrollment, and optional vesting Benefits including potentially lower costs, higher retention, and automatically pass most nondiscrimination tests. But it could lead to higher costs.

Source: Forusall.com, August 2023

2023 Expert Guide to Safe Harbor Match Options

This article dives into the range of Safe Harbor Match options, alternatives to the traditional Safe Harbor Match, and how to choose the Safe Harbor design that best fits your goals. It also discusses four key strategies you can use to decrease Safe Harbor costs and improve the chance your plan achieves strategic company goals.

Source: Forusall.com, June 2023

401k Safe Harbor Rules - 2023

A description of the 401k safe harbor rules, updated for 2023, as well as an explanation of the advantages and disadvantages of this plan design option.

Source: Consultrms.com, June 2023

SIMPLE IRAs vs 401k Safe Harbor Plans - 2023

This outline compares a SIMPLE IRA with a safe-harbor 401k plan and is especially important for employers who must cover participants other than just the owners.

Source: Consultrms.com, May 2023

Safe Harbor 401k: 2023 Guide for Employers

This article covers the highlights of a white paper, 2023 Definitive Guide to Safe Harbor 401k Plans, which covers everything you need to know about Safe Harbor 401k plans, including how tax credits can cover employer costs and a discussion of employer contributions for the first few years.

Source: Forusall.com, May 2023

Safe-Harbor Leveraging for Small Business, Top-Heavy Retirement Plans - 2022

Many employers are debating how to most efficiently take advantage of the defined contribution limit increase to $61,000. However, few owners of small businesses are aware of the extent to which certain types of "leveraging" are now permitted in qualified retirement plans. The purpose of this article is to illustrate the provisions that allow owners of small businesses to get the most in return for what they are willing to contribute on behalf of their non-owner employees.

Source: Consultrms.com, October 2022

Plan Design Solutions to Satisfy ADP/ACP Tests

Your 401k plan clients' mid-year test results will help you gauge which plans might be heading toward a failing grade on their year-end nondiscrimination testing. If a plan fails ADP, ACP, or top-heavy testing at year-end, the plan sponsor must take corrective actions such as returning deferrals to highly compensated employees or making additional employer contributions for non-HCEs. If you have plans that fail -- or barely squeak by -- each year, introduce them to the safe harbor plan design options that could guarantee them a pass on their next test.

Source: Newportgroup.com, September 2022

2022 Safe Harbor 401k Deadline Quickly Approaching

The IRS deadline to establish a new 2022 Safe Harbor 401k plan is October 1, meaning there is still time for small business owners to establish a new plan and take advantage of maximum contribution limits.

Source: 401kspecialistmag.com, August 2022

401k Safe Harbor Rules - 2022

A description of the 401k safe harbor rules, updated for 2022, as well as an explanation of the advantages and disadvantages of this plan design option.

Source: Consultrms.com, August 2022

Is a Safe Harbor 401k the Right Choice?

Contrary to popular belief, an employer-sponsored retirement plan is more than just a benefit for employees; there are many ways the plan sponsor can benefit as well. From attracting and retaining key employees to tax-deductible contributions and expenses, a retirement plan is a benefit that can work well for everyone involved. Despite the benefits, it can be difficult to sort through all the information out there and truly know which plan is best for you and your business. This guide explores the pros and cons of the safe harbor 401k and how to decide if it's the right option for you.

Source: Planpilot.com, April 2022

Safe Harbor Plan Rules for 2022

It's helpful to know which IRS rules and limits apply from year to year, whether you currently offer a Safe Harbor 401k or you are exploring options to open a small business 401k plan in 2022. See what rule changes are in place for small business Safe Harbor 401k plans for 2022.

Source: Myubiquity.com, March 2022

401k Safe Harbor Rules - 2021

A description and chart of the 401k safe harbor rules, as well as the advantages and disadvantages of this plan design option.

Source: Consultrms.com, November 2021

SIMPLE IRAs vs 401k Safe Harbor Plans - 2021

This outline compares a SIMPLE IRA with a safe-harbor 401k plan and is especially important for employers who must cover participants other than just the owners.

Source: Consultrms.com, November 2021

Updating Your Plan's Safe Harbor Notice

As the end of the year approaches, now is the time for safe harbor 401k plan sponsors to prepare their annual safe harbor notices. For a plan sponsor that has previously sent out the safe harbor notice, last year's notice should be updated for any changes. This may include updating the date of the notice, annual contribution limits, any deferral changes, any employer contribution changes (including vesting schedules), and any distribution changes.

Source: Spotlightonbenefits.com, October 2021

How to SECURE Your Safe Harbor Plan

The IRS issued Notice 2020-86, which guides the rules that apply to safe harbor plans that were changed by the SECURE Act. The guidance covers the increase in automatic contributions permitted under a qualified automatic contribution arrangement safe harbor plan, safe harbor notice requirement changes, and issues related to the retroactive adoption of safe harbor status.

Source: Beneficiallyyours.com, January 2021

IRS Guidance on SECURE Act Provides More Detail on Changes to Safe Harbor Plans

The SECURE Act made several changes to the rules for certain safe harbor 401k plans. One change increased the cap on automatic enrollment safe harbor plans to 15%. Another eliminated certain safe harbor notice requirements for plans that make safe harbor nonelective contributions and added new provisions for the retroactive adoption of safe harbor plans that make nonelective contributions. On December 9, the IRS issued Notice 2020-86 to elaborate on these changes as summarized here.

Source: Groom.com, December 2020

Safe Harbor Match Notice Not Distributed?

The barrage of changes introduced by the SECURE Act, closely followed by the CARES Act, along with furloughs, remote work, and all the work-life changes of the pandemic year 2020 may have resulted in administrative errors in plan operations, such as missed notice distributions. So now what?

Source: Belfint.com, November 2020

What are the Available Safe Harbor Plan Formulas?

401k plans are subject to nondiscrimination tests to ensure that a disproportionate share of the elective participant deferral is not those of the HCEs. The discrimination tests can be avoided if the employer sponsors a safe harbor plan. Safe harbor plans allow employers to disregard the nondiscrimination test if they make a generous, pre-approved employer contribution amount to all eligible employees. The minimum safe harbor employer contribution formulas available are reviewed here.

Source: Belfint.com, October 2020

Safe Harbor 401k 2020 Establishment Deadline

As you might expect, preparation and planning are always necessary to establish a new tax-qualified plan or redesign an existing one. The same holds for a Safe Harbor Plan. Therefore, even with the new Safe Harbor Plan establishment timing flexibility under the SECURE Act, now is the time to begin to consider whether a safe harbor feature is right for your company or your client's plan to ensure that it can be fully operational in advance of the applicable deadline.

Source: Legacyrsllc.com, August 2020

IRS Issues New Guidance for Mid-Year Changes to Safe Harbor 401k and 403b Plans

The IRS issued Notice 2020-52 addressing mid-year reductions and suspensions of contributions to Safe Harbor 401k and 403b plans. In response to the COVID-19 pandemic, the Notice provides some temporary relief for plan sponsors that wish to reduce or eliminate safe harbor contributions mid-year.

Source: Spotlightonbenefits.com, July 2020

The IRS Provides Relief for Mid-Year Reductions in Employer Contributions to Safe Harbor Plans

The Internal Revenue Service issued Notice 2020-52, which provides guidance and temporary relief for employers who may choose to reduce contributions during 2020 to their safe harbor 401k or 403b plan.

Source: Groom.com, July 2020

IRS Provides COVID-19-Related Relief to Safe Harbor 401k Plans

The IRS released additional guidance to help employers cope with the financial strain of the COVID-19 pandemic. This time, in Notice 2020-52, the IRS has clarified, and in some cases temporarily relaxed, rules governing when an employer with a safe harbor 401k plan can stop making safe harbor contributions without disqualifying the plan.

Source: Clarkhill.com, July 2020

IRS Offers Temporary Relief for Midyear Contribution Changes Under Safe Harbor Plans

In light of the COVID-19 pandemic, the IRS has issued Notice 2020-52, offering safe harbor plan sponsors temporary relief from certain requirements applicable to midyear reductions or suspensions of safe harbor contributions. Notice 2020-52 also clarifies the requirements for midyear contribution reductions (during or after the pandemic) that affect only highly compensated employees participating in a safe harbor plan.

Source: Thomsonreuters.com, July 2020

IRS Issues Limited 401k Safe Harbor Plan Relief for COVID-19

The IRS created a limited window during which plan sponsors will have some additional opportunities to make changes to their safe harbor 401k plans. This article is a summary of the specific relief.

Source: Sgrlaw.com, June 2020

IRS Grants 401k Safe Harbor Suspension Relief

The IRS released Notice 2020-52 which grants certain COVID-19 related relief to retirement plan sponsors who employ a safe harbor 401k plan design feature. The majority of the guidance is temporary relief which expires on August 31, 2020. However, the IRS Notice also includes a clarification that shall remain effective after August 31, 2020.

Source: Legacyrsllc.com, June 2020

What Is a Safe Harbor 401k?

A safe harbor 401k is a retirement plan that allows a company to avoid the regulations and expenses associated with nondiscrimination tests typically required of a 401k or other retirement account. A safe harbor 401k can simplify the process for a company looking to roll out a retirement plan to its employees if the company is willing to follow certain rules. Here's how a safe harbor 401k is set up and what problems it can solve for companies.

Source: Bankrate.com, June 2020

Safe-Harbor Leveraging for Small Business, Top-Heavy Retirement Plans - 2020

Many employers are debating how to most efficiently take advantage of the defined contribution limit increase to $57,000. However, few owners of small businesses are aware of the extent to which certain types of "leveraging" are now permitted in qualified retirement plans. The purpose of this article is to illustrate the provisions that allow owners of small businesses to get the most in return for what they are willing to contribute on behalf of their non-owner employees.

Source: Consultrms.com, May 2020

SECURE Act Allows for ADP Failure Relief

The SECURE Act includes provisions designed to encourage more employers to adopt retirement plans and simplifies issues that have bedeviled plan sponsors and taxpayers for years. One key provision amends prior rules for the late adoption of safe harbor plans.

Source: Hallbenefitslaw.com, May 2020

Reducing or Eliminating Matching Contributions Mid-Year

Employers wishing to reduce or eliminate a matching contribution during the middle of the plan year must be careful in assessing whether this is possible. Even where possible, there may be special requirements that must be met.

Source: Boutwellfay.com, May 2020

Suspending or Reducing Safe Harbor Contributions in DC Retirement Plans

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

Reducing or Suspending 401k Safe Harbor Contributions Mid-Year

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

SECURE Act: Relaxed Requirements for Safe Harbor 401k Plans

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

Details of the SECURE Act: Rules Related to Safe Harbor Plans

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

Are We Required to Make Safe Harbor Contributions for HCEs?

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

Safe Harbor 401k Establishment Deadlines

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

What's So Safe About a Safe Harbor 401k Plan?

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

Can a Company Implement a Match Safe Harbor Mid-Year?

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

Safe Harbor 401k Match vs. Nonelective Contribution

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

Safe Harbor for All? There is More Than One Way to Fix a 401k Plan

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

Key Considerations for Implementing a Safe Harbor 401k Plan

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

Does My Safe Harbor Plan "Require" Testing?

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

Safe Harbor or Traditional 401k Plan -- How to Decide

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

What You Need to Know About a Safe Harbor 401k

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

Safe Harbor 401k Plans: Everything You Need to Know

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

Everything You Need to Know About Safe Harbor 401ks

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

Safe Harbor 401k Plans: Everything You Need to Know

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

What is a Safe Harbor 401k Plan?

This article discusses qualifying requirements and the types of employer contributions when designing a Safe Harbor 401k plan.

Source: Boutwellfay.com, June 2018

Safe Harbor 401k Plans Make Sense for Many Businesses

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

SEPs vs 401k Safe-Harbor

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

Participant Notice Requirements for Safe Harbor 401k Plans

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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