Safe Harbor FAQ
What is a Safe Harbor?
The phrase “safe harbor” has many connotations in qualified retirement plans. However, when it is written as “Safe Harbor” it usually refers to an employer contribution to a 401(k) plan that removes some non discrimination testing requirements.
What is it really?
It’s a way to make sure that rank and file employees receive a certain minimum – 100% vested – benefit while allowing highly paid staff to defer the statutory maximum amount.
Can we skip handing out the Notices?
Sorry, no – it’s mandatory. The IRS has said that in order for the plan to benefit from the Safe Harbor provisions, the Notice must be distributed to each eligible participant at least 30 days before the start of the applicable plan year.
Who will be doing this?
Hunter Benefits Consulting Group will create the Notice for you. You will be responsible for distributing it to your participants.
Is there a fee for this?
Yes. The specific fee for your plan document will be in your individual Service Agreement.
When is it due?
At least 30 days before the start of the applicable plan year. In other words, the Safe Harbor notice for 2018 will be due in the participants’ hands no late than November 30, 2017.
What type of contributions are available?
There are 2 types. Some employers pick the 3% Safe Harbor Non Elective contribution. Each eligible participant receives a contribution equal to 3% of their compensation. The other choice is a match. The basic Safe Harbor Match is a 2-tier formula. It equals 100% of the first 3% of pay plus 50% of the next 2% of pay. Essential, a participant needs to defer at least 5% to receive the maximum 4% contribution.
Can a Safe Harbor 401(k) change its formula from one year to the next?
Yes. A plan can have the 3% formula one year and the basic match formula the next. However, the plan must be amended each time a change is made.
What do you need from me?
We have the document information already and we will be contacting you directly with any questions that arise.
How will you be contacting me?
You will receive electronic notification and will be able to find your Notice in the portal.
What is the process?
We prepare and send a master copy of the Notice to you. It is your responsibility to print the Notice and distribute to all eligible participants. You are requested to provide us with verification of when the Notices were distributed.