Safe Harbor 401(k)

why ubiquity

What is a Safe Harbor 401(k)?

Safe Harbor is a way of structuring a 401(k) plan that allows small business owners to maximize their contributions while sailing safely through annual compliance tests given by the IRS.

features

Maximize your retirement plan contributions

Incentivize your team to save for their future

Sail through certain required IRS compliance tests

Qualify for up to $16,500 in tax credits over three years

Safe HARbor 401(k)

The benefits of Safe Harbor 401(k) Plans

Avoid non-compliance tests

One major perk of the Safe Harbor 401(k) match is its automatic qualification in certain IRS nondiscrimination evaluations.

Simplified administration

By design, these plans ensure that many intricate IRS tests, including some onerous ones, are sidestepped, diminishing paperwork and freeing up administrative hours.

Attract & retain talent

Given the fierce competition in the job market, the offer of a comprehensive safe harbor retirement plan is a powerful lure for potential employees.

Employer match flexibility

Whether you opt for standard or advanced Safe Harbor 401(k) match provisions, you can determine a format that syncs well with your company’s investment objectives.

Higher contribution limits

Plan permits business proprietors and prime employees to invest more in their retirement accounts, amplifying their retirement savings possibilities.

Increased employee participation

Thanks to the immediate 100% vesting in Safe Harbor match contributions, employees are more elective about their participation.

Frequently asked questions

Is Safe Harbor right for my business?

While a Safe Harbor 401(k) can seem like an obvious choice, it may not be the best option for every plan.

Safe Harbor plans are a great fit for small businesses (particularly those with under 25 employees) and businesses that have failed noncompliance testing in the past. While you save in administrative hassle, you may pay a bit extra in plan costs and required contributions.

Weighing the pros and cons of a Safe Harbor plan for your business can be challenging—without all the additional hassle of setting up a 401(k). Luckily, our experts at Ubiquity can walk you through the plan design options and the setup process to make sure your plan is designed to fit perfectly to your needs. Only Ubiquity offers flat-fee plans¹,free expert advice, and 24 years of small business experience.

Safe Harbor notice requirements

Within 90 days before the beginning of the first Safe Harbor plan year (generally October 1), business owners must notify employees that a Safe Harbor feature has been adopted. Then, each year that the Safe Harbor feature is in effect, employees must receive a notice 30–90 days before the beginning of the plan year. This document outlines the employee’s rights and obligations under the Safe Harbor Plan provision.

The Safe Harbor matching or non-elective formula used in the plan
Level of matching contributions, if any, other contributions under the plan, and the conditions under which they will be made
The type and amount of compensation that may be deferred
The method of making deferrals under the plan
The periods available for making elections
The withdrawal and vesting provisions applicable to contributions under the plan
How to obtain additional information about the plan

Your Safe Harbor notice must contain the following:Your Safe Harbor Plan Notice may be delivered electronically, by hand, or by regular mail. Employers are responsible for tracking the delivery list, method, and timing of delivery— which will be requested in case of an audit by IRS or DOL. Companies like Ubiquity automatically do this on behalf of the small business owner, so they have one less thing to think about.

Additional Safe Harbor Rules:

100% vesting immediately. All Safe Harbor employer contributions are 100% vested to the employee — this means they are non-forfeitable. If you choose to make additional employer contributions (whether match or profit-sharing), those contributions may be subject to a vesting schedule.
12-month plan rule. Safe Harbor plan rules should be adopted before the first day of the plan year and remain in effect for an entire 12-month plan year.
Eligibility. All employees that are eligible to contribute to your 401(k) plan are also eligible for the Safe Harbor provisions for the plan. This means that once an employee is able to contribute to their own plans, they are also eligible for employee matching.
No allocation restrictions. Once an employee is eligible for the Safe Harbor contribution, they will receive the contribution due to them for the year. The employer cannot impose additional restrictions such as a last day of service or an hours requirement for Safe Harbor contributions.

What is the deadline to start a new Safe Harbor plan?

The Safe Harbor provisions must be in place for at least 3 months if you are adopting a new 401(k) or 403b plan.

So, if you are starting a new calendar year plan, the plan must begin no later than October 1, 2024 to include Safe Harbor provisions for that first plan year. Starting a new plan can take time to administer, so we recommend contacting your plan provider no later than September 1, 2024.

What is the deadline to add a Safe Harbor provision to an existing 401(k) plan?

Safe Harbor provisions can only be added to an existing plan before the beginning of the plan year and require you to provide a 30-day notice to your employees. If your new plan year begins January 1, 2025, you’ll need to request the addition of a Safe Harbor provision to your 401(k) plan before December 1, 2024.

‍Safe Harbor provisions cannot be changed or eliminated during the year except if the plan is terminated completely. In the event of plan termination, the Safe Harbor contribution up through the date of termination would still apply.