If you choose to sponsor a Safe Harbor 401(k), under IRS rules you must send regular notices to all eligible employees.
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Safe Harbor 401(k) plans offer tremendous advantages for employers–notably, they automatically pass ACP and ADP compliance tests required by the IRS.
Most plans automatically pass Top-Heavy tests, too. However, in order to be free from scrutiny, employers must follow the Safe Harbor rules for making matching or nonelective contributions to the plan AND for giving employees adequate notice of any changes made.
Each eligible employee must receive notice of their rights and obligations under the plan each year, including:
If the Safe Harbor is a QACA plan, sponsors must also provide notice of the level of elective contributions made in the absence of an affirmative election, the employee’s right to forego these contributions, and information regarding how the automatic contribution arrangement will be divided among investment options.
Generally, new plans should be set up by August 15, plan documents signed and Safe Harbor notices delivered by October 1, and elective deferrals activated by the first pay date in October.
Annual Safe Harbor notices may be delivered in writing or electronically.
For plan years beginning January 1, 2020, there is no Safe Harbor notice requirement for nonelective plans. Plan sponsors can now switch to a Safe Harbor 401(k) with 3% nonelective contributions at any time prior to the 30th day before the end of the plan year.
If the sponsor agrees to make a 4% nonelective contribution for the plan year, the amendment can be made any time prior to the last day of the following plan year.
Ubiquity is a 401(k) plan provider who serves as your best ally to stay on top of every IRS rule and regulation, including mandatory Safe Harbor notices. We take care of the day to day details of managing a 401(k) and consult with clients regularly to make sure the plan is to the benefit of all.
If you’re wondering how to set up a new Safe Harbor 401(k) plan, we’ll ensure it is set up in compliance with proper due dates. If you have an existing plan, you can add a Safe Harbor provision at any time.
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.