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 of up to $18,000 ($24,000 for age 50 and over) in 2017.
- 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- Tax-deferred growth — any investment earnings grow tax-deferred until withdrawn.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.
Investing involves risk, including potential for loss.
Not FDIC Insured
- No Bank Guarantee
- May Lose Value