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Safe harbor notices due December 1

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It’s the second week of November, but it’s a friendly reminder that if you offer a safe harbor 401(k) plan or you intend to offer that option next year starting in January 2017, December 1 is the date that plan participants should be given a notice that the plan intend to offer a safe harbor plan.

I will have to say that safe harbor plans pretty much arrived in the 401(k) business the same time as I did. I arrived in September 1998 and Notice 98-52 that allowed safe harbor plans starting in 1999 arrived less than 2 months later.

I have to say that in the 18 years I’ve been in this business, I believe that safe harbor 401(k) are still the best plan design feature created during my career. It’s a win-win for plan participants and plan sponsors because it allows plan sponsors to avoid ADP and ACP testing they likely would have failed and it requires them to make fully vested contributions to lower paid employees to achieve that free pass. Plan participants win because they get contributions they’ll all likely not have scene because plans that fail testing usually involve refunds to highly compensated employees rather than a corrective contribution they could benefit from, in addition the 3% non-elective contribution works really well with a cross tested/new comparability plan design.

If you’re a plan sponsor that fails your compliance testing or comes close to failing, it’s maybe a good idea to find out if a safe harbor plan design is good for you.

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