Retirement Services

401(k) Safe Harbor Plans

A popular version of traditional 401(k) plans, Safe Harbor Plans reduce IRS non-discrimination testing limitations while allowing business owners to maximize contributions to their own 401(k) plans.

  • Advantages
    • No discrimination testing when safe harbor rules are met
    • Participant deferral of current income taxes available or pre-payment of income taxes when using Roth option
  • Eligibility
    • All taxable businesses and tax-exempt organizations (excluding government entities) may establish 401(k) Plans
    • Any employee with 1,000 hours of service within one year and who is age 21 or older must be covered; exclusions are permitted for certain employees
  • Maximum total plan contribution that the employer may deduct

    25% of total eligible payroll (maximum eligible pay per participant is $275,000) plus the amount of elective deferrals contributed

  • Maximum annual allocation to participant’s account

    100% of participant’s total pay or $55,0001, whichever is less

  • Maximum annual participant deferral (cannot exceed 100% of pay)

    Up to $18,5002; catch-up contribution of $6,000 if age 50 or older. Annual participant deferral can be before-tax, Roth after-tax or both, depending on plan terms.

  • Required employer contribution One of the following:
    • Basic match3 formula (higher than with auto-enroll safe harbor)
    • Enhanced match4 formula
    • Non-elective contribution5

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