![]() ![]() Here are the most common contribution formulas we see that generally satisfy Safe Harbor requirements: There are many contribution possibilities, but many small business owners limit their contributions to the amounts required under their chosen Safe Harbor formula. How much do I have to give to my employees to satisfy safe harbor requirements? You already provide a generous (more than 3%) profit sharing or matching contribution to your employeesīy meeting the requirements of a Safe Harbor 401(k), the plan automatically passes critical compliance tests such as the:Īs a result, you and your key employees can contribute the maximum allowable amount ($18,000 2017) without worrying about refunds or additional employer contributions.Most of the assets (more than 60%) in your plan belong to owners or key employees causing the plan to fail a certain annual IRS compliance test known as the Top-Heavy test. ![]() Your plan has low participation rates or contribution rates preventing owners and other key employees from maximizing their contributions.Here are some of the most common reasons we see: There are many reasons why you may want to implement a Safe Harbor 401(k) plan. Why would I want to have a safe harbor plan? To get these benefits, the employer is required to make a contribution on behalf of their employees.įor many employers, that trade-off is well worth the cost. The features of a Safe Harbor plan allow an employer to automatically pass certain annual IRS compliance tests and allow its owners to maximize contributions to their 401(k) accounts. A Safe Harbor 401(k) plan is the most popular type of 401(k) implemented by small businesses today.
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