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.
- 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
- 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