Safe Harbor 401(k)

• Plan description
• Key features
• Who can establish
• Annual contributions
• Annual fees

Plan description

A 401(k) plan designed with a mandatory employer contribution but no discrimination testing.

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Key features

• Permits employers to choose either a 3% profit sharing contribution or a 4% matching contribution on a 5% deferral. Employer contributions must be made each year to maintain safe harbor provisions.
• Employees may defer without 401(k)-type discrimination testing.
• All contributions must be 100% immediately vested.
• Participant loans are available.
• Withdrawals are governed by the plan document and may be restricted.¹

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Who can establish

Businesses, partnerships, S-corporations², C-corporations² and nonprofit groups (No governmentals). Employers must provide a 30-day notice before establishing the plan.

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Annual contributions

Please see Retirement Plan Limits for the current compensation and contribution limits for this plan.

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Annual fees

Due to the complexity involving the contribution calculation, third-party administrative services are required.

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¹Amounts withdrawn from retirement plans are generally includable as taxable income in the year received and may be subject to tax penalties if withdrawn prior to 59½.

²S-corporations and C-corporations are two different types of legal structures, each of which is subject to different tax rules.

This information does not constitute tax advice. Please consult your tax adviser about your particular situation.