What Safe Harbor Means in a 401(k) Plan

What is a Safe Harbor Plan Fisher Investments® 401(k) Solutions

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A man dressed in a suit speaks to the camera. A flyout in the lower left corner identifies him as Michael Gaddi, Business Development Executive.

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Male Voice: Safe Harbor 401(k) plan is essentially a 401(k) plan with a Safe Harbor provision. Which essentially means that an employer can make a contribution on behalf of the employees to pass compliance testing.

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So, there are three types of Safe Harbor contributions. First being three percent non-elective. Second being basic match and lastly enhanced match.

So the reasons this matters and why it’s a great option for some businesses is because often times people aren’t aware of the limitations that can be created for certain employees and how they can contribute to the plan. Right, some aren’t able to maximize the benefits or the tax advantages including the owner. So, with a Safe Harbor as long as any one of those three contributions are made on behalf of the employees the plan automatically passes most annual compliance tests.

Now all the highly compensated employees, as well as the owner, can maximize their contributions and the business owner as well can maximize their contributions and tax advantages for the business.

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It’s important for a business owner to have the ability to maximize their personal contributions into the retirement plan. Because that’s what is going to allow them to maximize the full tax benefits within the retirement program.

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Safe Harbor is a great option for business owners who aren’t currently able to maximize the tax advantages and benefits due to annual compliance testing.

Also, you know any business that runs into corrective distributions also a great option.

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At Fisher Investments, we have the knowledge and expertise to guide our clients through all the many options when it comes to creating a 401(k) program. When you do better, we do better.

Fisher Investments 401(k) Solutions. © 2022 Fisher Investments. Investing in securities involves the risk of loss. Intended for use by employers considering or sponsoring retirement; not for personal use by plan participants.

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