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Safe Harbor 401(k) Plan

Safe Harbor 401(k) helps defer more Current Income Taxes and eliminate Compliance Testing

Before Safe Harbor 401(k) came along, every 401(k) had to undergo mandated compliance testing every year to make sure plans did not discriminate as to the availability of rights, benefits and features made available to different employees. Not correcting a failed year-end compliance test could mean substantial penalties and possibly even disqualification of the plan's tax-favored status.

The Safe Harbor 401(k) gives employers an option that helps them defer more income than under previous 401(k) plans, without compliance testing as long as Safe Harbor requirements are met.

In a traditional 401(k) plan salary deferral contributions made by highly compensated employees, generally owners, are limited by those made by employees. With a Safe Harbor 401(k), whether employees elect to participate or not — and how much they choose to contribute — in no way restricts the ability of highly compensated employees to defer the maximum permitted by the plan and IRS. And since the Safe Harbor Plan may be combined with profit sharing plans it provides an excellent way for employers to make the most of employers retirement savings. (Subject to IRS plan and participant limits.)

Employers should consult one of our Retirement Program Specialists to determine if they qualify for a Safe Harbor 401(k) plan. And, if they wish, we can also arrange for them to receive a customized retirement plan proposal from a Retirement Program Specialist at no cost or obligation to them.


  • Defer up to $20,500 regardless of employee participation levels.
  • Works with Profit Sharing Plan to contribute the maximum.
  • No discrimination testing.
  • Catch-Up contributions available for participants over age 50.
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