Time to evaluate 401(k) safe harbor feature
Posted 9-1-2011 | By Christine Bentson | Download Article
As we move into the tax planning season, employer sponsored traditional 401(k) plans and profit sharing plans should consider adopting a 401(k) safe harbor feature. Profit sharing plans can put this feature in place by Oct. 1, 2011 and still have it effective for the 2011 plan year. Traditional 401(k) plans should consider this option for the upcoming 2012 plan year.
The 401(k) safe harbor plan commits the employer to a 4% match or a 3% profit sharing plan contribution that’s 100% vested for participants. This contribution is a deductible business expense for the entity. And, more importantly, the feature allows a traditional 401(k) plan to avoid discrimination testing which in many cases limits the amount of contributions that go into the plan for key employees.
HLB Tautges Redpath is available to assist in amending or adopting a plan for you, as well as provide administration for these types of plans. Please contact Christine Bentson, CPA, RPA, CEBS, for more information at 651.407.5808 or cbentson@hlbtr.com.