401(k) Safe Harbor Plan
A type of qualified Defined Contribution Plan that permits employees to elect to defer compensation into the plan on a pre-tax, or in the case of Roth Contributions, post-tax basis. In addition, the Employer contributes a ‘Safe Harbor’ contribution. Safe Harbor employer contributions must be 100% vested at all times.
Advantages:
- Allows employees to make contributions to the plan via payroll deduction
- Employer contributions are tax deductible up to 25% of eligible employee compensation
- Employee contributions are tax deferred until distributed at retirement (except in the case of Roth contributions)
- Because the Employer is required to make a Safe Harbor contribution, the plan is deemed to pass certain non discrimination testing