401(k) plans can be confusing. With so many different types of 401(k) plans to choose from, it may be overwhelming to you as a business owner to find the best plan for your company and your employees. Helping your employees prepare for retirement is important to you, but finding the best, most affordable 401(k) plan to accomplish this goal while also potentially saving you money is important too.
The Storick Group wants to rid employers of this burden by setting up plan packages, like the Safe Harbor 401(k), to offer a more advanced look into what is possible for everyone in the company to feel comfortable and content with the benefits being provided.
If you’re unfamiliar with this 401(k) plan option, read on to learn all about 401(k) Safe Harbor Plans and how they can help you and your business!
What is a 401(k) Safe Harbor Plan?
Similar to a basic 401(k) plan, a Safe Harbor 401(k) has the same benefit options as the traditional plans, making it extremely appealing to both business owners and plan participants alike. The design is setup to have an immediate and free pass on both ADP and ACP testing, as well as Top Heavy minimum contributions.
What this means?
If the rules of the 401(k) Safe Harbor plans are followed- making specific contributions to each participant accordingly, then at the beginning of each plan year, you as a business owner have an automatic pass on any IRS ADP or ACP test. If your plans had trouble passing tests in the past, a switch to a Safe Harbor 401(k) could be everything that you have been waiting for.
How Does it Work?
A Safe Harbor plan type has to have certain rules set down by the IRS followed in order to guarantee the benefits of the package. The rules of a Safe Harbor 401(k) plan as stated by the IRS are:
- Must provide for employer contributions that are fully vested when made
- Employees must be given written notice of the employee’s rights and obligations under the plan
- The notice must describe the safe harbor method in use, how eligible employees make elections, any other plans involved
- The employer must provide notice within a reasonable period before each plan year of at least 30 days and not more than 90 days before the beginning of each plan year
Income Tax Regulations section 1.401(k)-3(d)(2), provides information on meeting the content requirement of a Safe Harbor plan through using any form of electronic media. For more information on the rules correlated to employees becoming eligible after the 90 day time limit, read the Income Tax Regulations section 1.401(k)-3(d)(3). Further information on other requirements as well as employee rights are covered in the Summary Plan Description provided by the IRS.
The business owner must elect at the beginning of each plan year to make one of two types of contributions.
One being a basic non-elective contribution to all eligible participants, and the other being a matching contribution based on specified rules. A match can either be a Basic Match, or an Enhanced Match.
The Basic Match is a 4% contribution for participants whom defer at least 5% of their pay, while an Enhanced Match can go all the way up to 100% of the first 6% of pay and still allow a pass on the ACP test.
Another great thing about the Safe Harbor 401(k) is there is an option to make a decision on switching to Safe Harbor AFTER the beginning of the plan year. Safe Harbor plans are incredibly flexible. If your company does not implement a Safe Harbor plan before the start of the plan year, you have the ability to switch or change your plan at a later date for that plan year.
With all of that said, it is The Storick Group’s goal to make these decisions easier for our customers. We like to work hard for businesses who utilize our services, breaking down all the necessary information and provisions as painlessly and efficiently as possible, making seamless transitions throughout benefit plan years.
What Types of Businesses Could Benefit from a Plan Like This?
Normally, the plans that have the most to gain from the Safe Harbor 401(k) route are ones that have issues passing the ADP or ACP testing, and ones that require top heavy minimum contributions.
The best thing about the Safe Harbor 401(k) plan that we provide is the small business feel to any and all companies attached to the benefits. Our goal is to make you feel as if you are not just a number on our to do list. Requesting proposals are made simple, speaking to our representatives to answer any further questions you may have is effortless, and the idea that you can have an open door policy with your 401(k) provider is always something we pride ourselves in.
No matter how large your business, The Storick Group will take the time out to make sure you have the best fit with the lowest fees.
The Bottom Line
Safe Harbor plans are an excellent option for business owners who desire flexibility in their 401(k) plans. The ability to change certain of the aspects of your plan throughout the year is a key feature. For example, you have the ability to change your non-elective contributions or, for qualified employees, change the plan entry date from quarterly to monthly. This flexibility is a major point which may be attractive you as a business owner as well.
Safe Harbor plans also allow for exemption from any IRS ADP or ACT testing. This means that you are automatically protected from incurring any consequences that would ensue should either of there be any violation of these tests.
And remember: Safe Harbor plan are able to be implemented at any point of the plan year. So long as proper notice is given to employees, the ability to implement a Safe Harbor plan at any given point is another great selling point of this plan type.
Safe Harbor plans are an excellent option for business owners who desire flexibility in their 401(k) plans. The Storick group offers a multitude of plans from a list of select providers that best suits you and your company. With annual plan administration fees as low as $65, and the ability to customize your companies retirement plans, all while maintaining a high level of consulting and administration plan design, we take the worry out of setting up retirement plans for you. To be proactive is to be successful, waiting to figure things out when the time comes does not work anymore. We know your time and your money is valuable, and that’s why we make it as easy as possible to accomplish your goal of finding the perfect yet affordable 401(k) plan option.
The Storick Group is at your disposal, online, or in person. We want to make you feel secure, knowing your future is in good hands. Allow us to create your retirement plans without the hassle. No red tape, no guessing games, we provide the most competitive prices, coupled with the most comprehensive knowledge and know-how in the business to date. The Storick Group is here for you today.