A Safe Harbor 401(k) plan is a strategic way to simplify compliance while attracting and retaining top talent. This plan structure allows business owners and highly compensated employees to maximize their contributions without the risk of failing IRS nondiscrimination tests.
Key Benefits of a Safe Harbor 401(k):
- Avoids IRS Testing Requirements – Eliminates ADP/ACP and top-heavy testing.
- Encourages Employee Participation – Employer contributions incentivize savings.
- Maximizes Contributions for Key Employees – Owners and executives can contribute the annual IRS limit ($23,500 in 2025, plus $7,500 catch-up for those 50+ and an enhanced catch-up contributions for Ages 60 to 63 of $11,250.)
Safe Harbor Contribution Options:
To qualify, employers must commit to one of these employer contribution models:
- Basic Safe Harbor Match – 100% match on the first 3% of pay, plus 50% match on the next 2%.
- Enhanced Safe Harbor Match – 100% match on the first 4% of pay or more.
- Non-Elective Contribution – At least a 3% contribution for all eligible employees, regardless of whether they contribute.
Is a Safe Harbor Plan Right for You?
- Best for: Companies that want to ensure maximum contributions for executives while offering strong benefits to all employees.
- Considerations: Employer contributions are mandatory, but they can help with recruitment and retention.
If you’re considering a Safe Harbor 401(k) plan, let’s discuss the best structure for your business.
Joe Trybula, CFP®, QPFC®
ACCREDITED INVESTMENT FIDUCIARY™
📧 joe@diversifiedfa.com
📞 800-307-0376