1/13/2024 0 Comments 401k safe harborQACAs require employers to automatically enroll employees in the plan but allow for a 2-year cliff vesting schedule. QACA plans are a great choice for employers that want a safe harbor but also want to vest contributions. Qualified automatic contribution arrangement (QACA): For example, employers may match 100% of the first 4% of an employee’s contribution, up to 6%. 4% Match: The traditional safe harbor match is a 100% match on the first 3% of an employee’s contribution and a 50% match on the next 2%Įnhanced safe harbor contributions must also vest immediately however, employers can structure their contribution to be more generous than the traditional safe harbor plan.3% Non-elective: Contribute 3% of every eligible employee's pay to the 401(k).Those contributions must also be 100% vested immediately.Įmployers have two choices on how to make contributions: There are three types of safe harbor 401(k) plans, each with its own features and requirements.Ī traditional safe harbor plan requires employers to contribute between 3% and 4% of eligible employee pay to the 401(k). Immediate vesting of employer safe harbor contributionsĪt the end of 2022, 36% of employers offered a safe harbor plan because they’re easy to administer and popular with employees.A minimum safe harbor contribution to employees (typically 3% Safe Harbor Non-elective contribution to every employee or a 4% Safe Harbor Match).If a plan includes the following safe harbor provisions, it automatically passes non-discrimination tests: Unlike a traditional 401(k), a safe harbor plan doesn’t require business owners to perform annual nondiscrimination testing. In this blog post, we'll discuss the benefits of safe harbor 401(k) plans for business owners, how they compare to traditional 401(k) plans, and answer some frequently asked questions about safe harbor plans.Ī safe harbor plan is a type of 401(k) that ensures all eligible employees receive a company contribution (like a company match). Navigating the world of retirement plans can be overwhelming, especially when deciding between traditional 401(k) plans and safe harbor 401(k) plans. Secure Act tax credits may cover up to 100% of employer costs and greatly subsidize Safe Harbor contributions.
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