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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Choosing a Safe Harbor 401(k) retirement savings plan can be highly advantageous for small businesses, allowing employers to:
While Safe Harbor 401(k) plans are exempt from ADP (Actual Deferral Percentage) and ACP (Actual Contribution Percentage) nondiscrimination testing by the IRS, they may still be subject to top-heavy testing. Small business 401(k)s with Safe Harbor provisions are generally EXEMPT from top-heavy testing if the plan only receives elective deferrals and safe harbor minimum contributions such as:
You will be subject to top-heavy testing in a given year IF:
Eligibility requirements for Safe Harbor plans are longer than the eligibility requirements for an employee deferral plan. The following employees would not be eligible for the Safe Harbor exemption:
Regardless of Safe Harbor status, a 401(k) plan must satisfy the top-heavy nondiscrimination test whenever profit-sharing contributions are made. However, following a pro-rata or permitted disparity formula can help pass this test.
A non-exempt ACP and top-heavy match:
“Mega Back Door” 401(k) and IRA plans have been a popular way for high earners to shelter some of their salary from tax requirements. Retirement savers can set aside up to $61,000 per year, rather than the usual $20,500. While they will still have to pay taxes on the amount reserved when they take the money out during retirement, they can still benefit from tax-free growth in the meantime. However, it is important to note: Safe Harbor 401(k)s lose the top-heavy “free pass” when voluntary contributions are made to key employees.
As a small business 401(k) plan administrator, Ubiquity is here to help. We will help determine whether your plan is top-heavy each year. This occurs when more than 60% of the assets in the plan goes to key employees. A “key” employee is someone who is:
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 401(k) 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 401(k) plan design. Take advantage of this free benefit.