Ubiquity Retirement + Savings has been an affordable provider of retirement solutions, including Safe Harbor plans, designed for small businesses since 1999.
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How many employees do you have?Just me and/or my business partner/spouse
Safe Harbor 401k Plans are subject to the same contribution limits as any other 401k plan.
Safe Harbor 401k plans, like all 401k plans, allow individuals in 2020 to save up to $19,500.
Workers who will be 50 or older before the end of the year are able to save an extra $6,500 each year as a catch-up contribution for a maximum limit of $26,000.
Contributions from your employer, via Safe Harbor match, do not count toward your contribution limit. The total combined employer and employee contribution limit is $57,000.
Safe Harbors may have the same 401k contribution limits as other 401ks, but they differ in terms of:
No ADP/ACP compliance tests are required for a Safe Harbor 401k plan.
100% vested employer contributions must be made to all eligible employees.
Employers can choose from a basic, enhanced, or non-elective matching algorithm:
The employer matches 100% of employee contributions, up to 3% of their compensation, plus a 50% match on the next 2% of their compensation.
The employer matches 100% of employee contributions, up to 4% of their compensation, not to exceed 6%.
The company contributes at least 3% of employee compensation, regardless of what employees contribute.
Other than that, a Safe Harbor 401k is essentially subject to the same rules and limits as any other 401k.
The needs of every business are different, but safe harbor plans typically work well for small businesses.
You’re already well aware that offering a 401k plan is a generous employment benefit that makes it easier for your employees to save for retirement. The government wants to see that businesses treat all employees fairly in preparation for retirement, which is why a standard 401k has mandatory nondiscrimination testing.
The IRS doesn’t want business owners to simply set up accounts for themselves and a handful of highly compensated executives to dodge tax liability, for example. If your plan were to fail these tests, you could expect costly fees, 401k contribution refunds to employees, and a lot of extra administrative hassle.
If compliance has been troublesome in the past or if you’re just looking for a new plan without all the headaches, the Safe Harbor option is a sensible choice. You may have to pay a vested match to guarantee fairness, but you enjoy the same high limits of a traditional 401k.
New plans should be established no later than October 1, so be sure to contact a plan provider before September 1. If you want to add a Safe Harbor provision to an existing 401k, your administrator can make an amendment that goes into effect on January 1, 2021. Given the 30-day notice requirement and lead time for administration, you should try to get this taken care of by the end of November to prepare for the following year.
Contact Ubiquity to tackle the administrative side of a Safe Harbor 401k plan with ease and expert efficiency.
If you are a small business owner and need a retirement plan for yourself and your company, only Ubiquity offers flat-fee plans, plus expert guidance along the way.
We will fully customize your plan to meet the specific needs of your small business.
Setting up a 401k can be complicated. Only Ubiquity gives small business owners access to retirement experts in addition to industry-leading low flat-fees. Each sales expert has over a decade of experience assisting business owners in 401k plan design. Take advantage of this free benefit.