Save time with our cheat sheets, fact sheets, checklists & books!

February 15, 2009

Safe Harbor 401(k) Plan

Your Guide



401(k) plans that make contributions in accordance with a safe-harbor formula, resulting in the plan not being subject to the ACP and ADP nondiscrimination testing, and the top heavy testing. Generally, 401(k) plans must perform ADP , ACP and top heavy testing in order to be in compliance with regulatory requirements. If the plan fails the tests, corrective action must be taken. An employer may avoid these tests by ensuring contributions satisfy one of the safe harbor formulas

Referring Cite

Treas. Reg. §1.401(m)-3, Revenue Procedure 2004-13 IRS Notice 98-52 and Notice 2000-3

Additional Helpful Information

  • Safe-harbor 401(k) plans are attractive for small businesses because they avoid the nondiscrimination tests, which can be costly.
  • Contributions to safe-harbor 401(k) plans are immediately 100% vested

Keep Learning

Domestic abuse distribution

A domestic abuse distribution is one that is made to domestic abuse victim, during the 1-year period beginning on any date on which the individual

Eligible retirement plan

The term “eligible retirement plan”, means a retirement plan to which a rollover contribution can be made. These are: (i)an individual retirement account described in

Qualified See-Through Trust beneficiary

Definition A qualified trust beneficiary is a trust that satisfies the requirements so as to be treated as a designated beneficiary.   For retirement accounts inherited

Saver’s Credit

Definition Also known as the Saver’s Tax Credit: Nonrefundable tax credit available to eligible individuals who make contributions to their retirement account. The saver’s credit

Be among the first to know when

IRA Rules