A safe harbor 401k plan is a retirement plan that has specific methods outlined to guarantee the plan is meeting non-discrimination requirements. A safe harbor plan protects all employees from favorable treatment to any employees in the distribution of retirement contributions. The plans require one of two options for the employer to contribute to the employee accounts:

  1. The employer may choose a non-elective contribution where they provide at least straight 3% contribution to all 401k plan eligible employees, whether or not they are contributing themselves.
  2. The employer may choose an elective contribution where they only provide a contribution to those eligible employees who are contributing to their own account. The match for these participants must be at least 100% of the amount of contribution for the first 3% of employee’s income- dollar for dollar. The following 2%(4 and 5 % of income) will be matched at 50% or 50 cents on the dollar. The end result is employer contributing 4% of funds to the employees own 5% contribution.

The safe harbor plan also requires the employer to distribute safe harbor notices to each employee prior to the beginning of each plan year. As a Financial Advisor, please carefully consider your savings options. The advantages of 401k savings provide special opportunities for a better retirement.


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