Safe harbor match11/4/2023 The availability of tax advantages or other benefits may be contingent on meeting other requirements. Account owners assume all investment risks as well as responsibility for any federal and state tax consequences. Investment returns are not guaranteed, and you could lose money by investing in a 529 plan. ![]() When you invest in a 529 plan, you are purchasing municipal securities whose value may vary based on market conditions. ![]() We may amend this policy from time to time if we do, we will post those changes on this page within a reasonable time after the change so that you are aware of what information we collect and how we intend to use it.ĭepending on your interaction with Ascensus, other privacy policies may apply in addition to this Policy.īefore investing in any 529 plan, please consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s 529 plan. Give us a call at 83, option 1 to learn more.īy using our website, interacting with us on social media, or communicating with us via email or other electronic messages (“Digital Presence”), you consent to the collection, use, and storage of your personal and non personal information as described by our Terms & Conditions of Use, which includes our Privacy & Security Statement. Not sure if safe harbor is right for your company? Ascensus has retirement experts with decades of experience ready to help. ![]() To get the benefits of safe harbor, plans must also meet several criteria just to qualify-including required employer contributions, mid-year amendment restrictions, and potential notice requirements. Safe harbor plans can be more expensive than traditional plans, and if your business has inconsistent revenue streams, it may be difficult to maintain year-round matching or non-elective contributions. There are, however, some downsides when considering a safe harbor plan versus a traditional 401(k) plan. They may help reduce business taxes and help employees build a larger nest egg all at the same time.They limit the effects commonly felt from IRS top-heavy and non-discrimination testing.They allow plans to bypass top-heavy rules and discrimination tests for salary deferrals and employer contributions, as long as they meet the safe harbor provisions.They allow business owners and other HCEs to contribute the maximum annual deferral amount into their accounts.Safe harbor retirement plans can have several additional advantages for small businesses: Benefits of safe harbor retirement plansĪ safe harbor plan is an attractive alternative for businesses that want the benefits of a 401(k) plan but do not want to, or are not able to, satisfy the required annual compliance testing. For small companies, the popular safe harbor plan design can be a win-win for both owners and employees. This added benefit may be well worth the potential higher cost of a safe harbor plan. On the other hand, a safe harbor plan allows an employer to make a minimum contribution to their employees’ accounts, while giving the owner and other HCEs the ability to maximize their personal contributions to the plan. But with a safe harbor plan design, employers can match employee contributions or make non-elective safe harbor contributions without many of the Department of Labor/IRS regulations that come with traditional plans.Īnd as an employer sponsoring a traditional 401(k) plan, you may be limited in the amount you can personally contribute to your retirement savings. Traditional plans are required to go through discrimination testing to ensure HCEs are not disproportionately advantaged in the plan. Key differences between traditional 401(k) plans and safe harbor plansĪlthough traditional 401(k) plans allow both employees and employers to contribute to employee accounts, the amount Highly Compensated Employees (HCEs) can contribute may be restricted by maximum income and discrimination testing limits. This is a vitally important decision, as your choice can have long-term implications for both your employees and your company. With so many options and so much to consider, one key decision you may have to make is whether to go with a traditional plan design or a safe harbor plan design. Determining the right type of 401(k) plan for your small business can be challenging.
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