Skip to Main Content

Start Of Main Content

Safe Harbor 401(k) Plan

The Safe Harbor 401(k) Plan allows eligible employees to contribute a portion of their own salary to a retirement plan. Salary deferrals can be pre-tax contributions (excluded from income for federal income tax purposes) or Designated Roth Contributions (after-tax contributions and qualified distributions can be tax and penalty free). Employers contribute either matching or non-elective amounts to the retirement plan on behalf of eligible employees. A safe harbor 401(k) plan may help you with recruiting and retaining the best employees.

  • Sole proprietorships, partnerships, limited liability companies (LLCs), or incorporated businesses, including subchapter S corporations, may establish a 401(k) plan. All eligible employees must be allowed to participate in the retirement plan.
  • Designated Roth Contributions are an option for salary deferrals and there are no income restrictions on who may make these contributions.
  • Salary deferral contributions up to $18,500 ($24,500 for age 50 and over) in 2018.
  • Automatic Enrollment and Automatic Increase features are available to help employees save for their retirement.
  • All employee and Safe Harbor 401(k) matching or non-elective contributions are 100% vested immediately. The employer may elect to use a graded vesting schedule for discretionary contributions.
  • Generally, the deadline to establish a new plan is anytime between January 1 and October 1 of the applicable year.
  • Tax-deferred growth — any investment earnings grow tax-deferred until withdrawn.
  • Generally, the 10% tax penalty on distributions applies to participants under the age of 59½. Participants will have to pay federal income tax on the distributions.

  • May be required to be 21 years old.
  • May Require up to 1,000 hours of service from the date of hire to be eligible to participate.
  • Union employees and non-resident aliens who have no U.S source of income may generally be excluded from coverage.
  • Less restrictive eligibility requirements can be established.

  • Owners may make salary deferral contributions of up to $18,500 ($24,500 for age 50 and over) in 2018, either excluded from federal income tax or as Designated Roth Contributions.
  • There is flexibility in the amount of the employer discretionary contribution.
  • Contributions can be electronically submitted after each pay period.
  • The employer may choose a match equal to 4% to 6% of salary deferrals or at least a 3% non-elective formula for all eligible employees. This contribution is tax deductible to the employer.
  • A discretionary contribution may be made to the plan, subject to deductibility limits (25% of all eligible participants compensation less the total amount of Safe Harbor 401(k) contributions). There are several options available for the discretionary contribution.
  • Employer contributions are tax-deductible to the employer.
  • Safe Harbor 401(k) plans are not typically subject to non-discrimination testing.
  • Our record keeper helps you with compliance reporting and filing the annual Form 5500.
  • Funded with State Farm Mutual Funds®.

Comparison of plan features and benefits

Risk Disclosures

Securities distributed by State Farm VP Management Corp.

Securities are not FDIC insured, are not bank guaranteed and are subject to investment risk, including possible loss of principal.

Neither State Farm nor its agents provide tax or legal advice.

State Farm VP Management Corp. is a separate entity from those State Farm entities which provide banking and insurance products.

Automatic investment plans do not assure a profit or protect against loss.


Not FDIC Insured
  • No Bank Guarantee
  • May Lose Value