The “Safe Harbor” Contributions are mandatory employer contributions . “Safe Harbor” The most popular type of 401k retirement plan for businesses with employees.

Safe Harbor 401(k) Options:

3% NON-ELECTIVE

  • 3% Employer Contribution
  • Allocated to all eligible employees (whether or not they make 401(k) deferrals)
  • 100% Vested
  • **May allow for year-to-year discretion**

ENHANCED MATCH

  • Employer matches 100% of deferrals up to 4% of compensation
  • Maximum allowable match is 100% up to 6% of compensation
  • Allocated only to employees who make 401(k) deferrals
  • 100% Vested

BASIC MATCH

  • Employer matches 100% on first 3% of compensation AND 50% on 4th and 5th percent of compensation
  • Allocated only to employees who make 401(k) deferrals
  • 100% Vested

Safe Harbor Contributions are mandatory employer contributions. The Safe Harbor 401(k) or 403(b) plan is allowed a free pass on the Actual Deferral Percentage (ADP) test and the Actual Contribution Percentage (ACP) test. The failure of these tests usually results in a refund of deferrals to highly compensated employees. The Safe Harbor match eliminates the Top Heavy problem as well – as long as profit sharing contributions are not made into the plan.