Safe Harbor 401(k) Plans: FAQs for Small Businesses
Plan Design Is your small business overwhelmed by annual 401(k) nondiscrimination testing ? A safe harbor 401(k) plan can automatically satisfy the ADP/ACP and top-heavy nondiscrimination tests when certain employer contribution and participant notice requirements are met. That means no corrective refunds to Highly Compensated Employees (HCEs) , no surprise top heavy minimum contributions, and more predictable budgeting—all while giving you an edge in recruiting talent. We get a lot of questions from small business owners about safe harbor 401(k) plans. Here are answers to the most important questions we receive. They reflect changes made by the SECURE Act of 2019 (SECURE 1.0 ) and SECURE Act of 2022 (SECURE 2.0). What Makes a 401(k) Plan “Safe Harbor”? To achieve safe harbor status, a 401(k) plan must meet the following requirements: Mandatory Employer Contributions: Employer must provide employees with either a matching or nonele...