401(k) Safe Harbor Contribution Limits for 2022

Author: Siân Killingsworth / 10 Feb 2022 / 401(k) Plan Information, Safe Harbor

The IRS is increasing the maximum individual 401(k) contribution limit by $1,000 – from $19,500 to $20,500 in 2022. The Safe Harbor 401(k) contribution limit for 2022 is the same as a Traditional 401(k), even though Safe Harbor plans are exempt from most nondiscrimination testing. The 2022 catch-up contribution limit for Traditional and Safe Harbor plan participants who are age 50 or older remains the same at $6,500.

Continue reading to learn how Safe Harbor contribution limit changes for 2022 can affect how much you are able to put into tax-deferred savings this year. The amount you contribute is pre-tax, meaning that it can also reduce your taxable income, tax bracket, and the percentage of taxes you owe for 2022.

Contact Ubiquity, a leading provider of Safe Harbor 401(k) plans for small businesses, for details. It’s not too late to start a Safe Harbor 401(k) plan or add a Safe Harbor provision to an existing plan for 2022.

2022 Employer 401(k) Safe Harbor Limits

The $20,500 limit applies to individual 401(k) contributions. Employers offering Safe Harbor 401(k)s are required to make contributions to all eligible employees’ plans. Safe Harbor match can range from 3.5% to 6% if you have auto enrollment, and 4% – 6% if you do not have auto enrollment. A plan with or without auto enrollment can elect a 3% Safe Harbor non-elective contribution. If you have auto enrollment, you can elect to vest at two years, whereas without it, the Safe Harbor would be vested at 100%.

• For 2022, employers can add $40,500 onto the $20,500 individual limit.
• The total combined contribution limit is $61,000 for people under 50 or $67,500 for people over 50.

2022 Income Threshold for Determining Employer Contributions

Highly-paid employees are restricted in their ability to make 401(k) contributions. Plan compensation limit has increased to $305,000 in 2022 – this is up from the $290,000 2021 401(k) Safe Harbor contribution limit. For example, a company plan matching 4% of an employee’s salary would not match 4% on employees earning $1 million. Instead, the employer would pay the employee 4% of the $305,000 maximum cap.

2022 Definition of Highly Compensated Employees

If you haven’t set up a 401(k) Safe Harbor plan for 2022 yet, you may consider doing it soon if you’ve failed nondiscrimination tests in the past or if you have a lot of “highly compensated” or “key” employees.

• Highly Compensated Employees: In 2022, a highly compensated employee is someone who earned more than $130,000 or who owned more than 5% of the business in 2021 (family attribution rules apply). If the average employee puts 4% of their income into the retirement savings plan, a highly compensated employee generally cannot contribute more than 6% of their income.
• Key Employees: Officers earning salaries of more than $200,000, more than 5% owners (family attribution rules apply), or more than 1% owner earning more than $150,000 in 2022.

2022 Safe Harbor Deadline

Business owners concerned with maxing out their retirements, compensating highly paid and key employees well, and passing the IRS non-discrimination testing may add a Safe Harbor amendment to their plans.

• The deadline to amend an existing plan to add Safe Harbor match was December 1, 2021 for 2022
• The deadline to adopt a new Safe Harbor 401(k) plan with matching in 2022 is October 1, 2022
• The deadline to adopt a new Safe Harbor 401(k) plan with nonelective contributions is December 2, 2022

Call Ubiquity to get started on setting up a Safe Harbor 401(k) plan or to add a Safe Harbor provision to your existing plan. We take care of small businesses with the industry’s most affordable 401(k) plans at low, flat, monthly rates with no AUM or per-person fees.