Safe Harbor 401(k)s are designed to allow owners and highly compensated employees (generally owners and those making over $120,000) to contribute up to the maximum dollar limit as their 401(k) elective deferral without regard to what other employees contribute. The maximum deferral for 2019 is $25,000 if a participant is age 50 or over.

https://mkginsuranceagency.com/business-owner-retirement-plans/

Safe Harbor 401(k) Solution vs Traditional 401(k)

Allows the owner and other highly paid

employees to contribute the maximum

deferral allowed by law no matter how

much (or how little) the other employees

contribute.

Traditional 401(k) plans are required

to ensure that all employees are treated

equally under the plan, regardless of the

pay level.

Highly compensated employees’

contributions may be limited dependent

upon what all other employees contribute

as elective deferrals to the plan under the

annual ADP/ACP test.

A Safe Harbor 401(k) will be deemed

to have automatically met the top heavy

requirements regardless of the percentage

of the plan assets in the key empoyees’

accounts.

When the balances of the key employees

of the company are at least 60% of the

total plan assets, the plan is considered top

heavy.

If key employees continue to contribute

salary deferrals to the plan, the company

is required by law to make a contribution

of at least 3% of pay to all other employees

in the plan. This is very likely to occur in

a small company’s 401(k) plan since key

employees are likely to make the largest

contribution to the plan.

A safe harbor plan solves these 401(k) plan problems often encountered by a small employer making it a very attractive plan for the small business owner.

MKG Insurance Agency

California Dept. Insurance License 0J03013

4021 N Fresno Street #107| Fresno, CA 93726

(559) 293-4977 direct | (866) 675-3933 ext 

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