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401(k) Safe Harbor Profit Sharing Plan

The safe harbor 401(k) plan is designed to eliminate the nondiscrimination testing imposed by traditional 401(k) plans and allow every participant to defer up to the maximum limits. In order to maintain the “safe harbor” status, the employer must make a 100% vested “safe harbor” contribution with one of the following two options: a three percent of compensation contribution to all eligible employees or a matching formula equal to 100 percent of salary deferrals up to three percent of compensation and 50 percent of salary deferrals between three and five percent of compensation.

Reasons to adopt a 401(k) Safe Harbor Plan for your business:

Employees contribute for their own retirement
All employees can defer up to the maximum limits
Flexible and tax-deductible annual employer contributions
Federal (and most state) income taxes are deferred until distribution
Employer does not bear the entire retirement funding burden
Allocation flexibility with the employer discretionary contribution
Vesting schedule available

Considerations when adopting a 401(k) Safe Harbor Plan:

Retirement benefits are impacted by investment returns
Employer contribution is required to maintain safe harbor status
Safe harbor contribution is fully vested

Lafayette Life Insurance Company provides services to pension plans as outlined in a separate Administrative Services Agreement, and issues life insurance and annuity products that may be used as funding options. Lafayette Life does not serve as plan administrator, nor does Lafayette Life or its representatives provide ERISA, legal or tax advice. The client’s personal or legal tax advisors should always be consulted and relied upon for advice.