As a Safe Harbor 401(k) Plan Administrator, Ubiquity can set up a retirement plan for your small business that automatically passes annual IRS compliance testing.
Customize a simple, affordable retirement plan for your small business in just a few clicks.
A Safe Harbor 401(k) plan is an excellent retirement savings vehicle for small businesses with top-heavy plans.
Unlike most 401(k)s, the Safe Harbor is structured in a way that automatically passes annual nondiscrimination tests. As a safe harbor 401(k) plan administrator, Ubiquity can walk you through the setup process, help you maintain a plan that works for your company, and ensure IRS/DOL compliance year after year.
Anyone can get a Safe Harbor 401(k), but employers must make a mandatory contribution to all eligible employees, so it may not be the cheapest way to cover workers with retirement benefits.
A Safe Harbor is a great plan for:
Just two highly compensated employees wanting to contribute the maximum to their 401(k)s can be enough to cause you to fail nondiscrimination testing. With a Safe Harbor, top earners will be able to max their savings, while employees that may not want to save themselves can benefit from your contributions.
You may have top executives who want to max their retirement savings and many employees who are not contributing at all. A Safe Harbor provision can help. You can add a profit-sharing component if you’d like and still pass compliance testing.
A plan is considered “top-heavy” when owners and key employees control 60% or more of the total assets in the plan.
Failing ADP, ACP, and top-heavy tests creates an embarrassing hassle for employers, resulting in refunds to highly compensated employees (which creates added tax liability for the year) and/or additional contributions to non-highly-compensated workers (which adds to the expense of the plan). The guarantee of passing these tests is why many small business employers like the Safe Harbor provision.
Setting up a new Safe Harbor 401(k) plan will involve a quick consultation and some paperwork – which we can do all online at Ubiquity.
If you already have a 401(k), you can add a Safe Harbor provision onto an existing plan. The new provisions must be adopted before the first day of the plan year and remain in effect unchanged for at least 12 months.
Your 401(k) administrator will ensure that you meet all the requirements for a Safe Harbor plan, including:
You can choose a basic match (100% of all employee contributions up to 3% of their compensation, plus a 50% match on the next 2% of their compensation); an enhanced match (100% of all employee contributions up to 4-6% of their compensation); or a nonelective contribution (at least 3% of an eligible employee’s compensation).
New plans must be initiated by October 1, with 30 days of notification prior to the start of the plan. Ideally, the plan will be established by August 21, with the notice out by September 1. However, a plan amendment can be made for existing plans that goes into effect for January 1 as long as notice is sent out by the end of November. A last-minute provision can be added any time before December 1, as long as you’re willing to contribute at least 3%, or any time before January 1 as long as you contribute at least 4%. These last-minute provisions were added on in the 2019 Secure Act as a way for employers who wouldn’t otherwise pass their nondiscrimination tests to rectify the situation before the year’s end.
The maximum allowable contribution changes from year to year. In 2022, employees could defer up to $20,500 for those under 50 or $27,000 for those over 50. The total combined amount of employer/employee contributions cannot exceed $61,000 (under 50) or $67,500 (over 50). The maximum amount of compensation considered for plan compliance is $305,000, with thresholds set at $200,000 for key employees and $135,000 for HCE employees.
Investing in happy employees who feel secure in their future can pay big dividends for your business. Ubiquity is committed to helping you discover and implement the best retirement plan for your small business – all for a low, flat, transparent monthly fee. Contact us to learn more about Safe Harbor 401(k)s. We allow you to work with a financial broker of your choice to keep costs reasonable and never charge per-participant or AUM fees.
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.