Mary Beth’s Corner

Safe Harbor Deadline Coming in Hot!

Administration, General, IRS Notices
August 15, 2024

Sponsoring a 401(k) plan offers numerous benefits for business owners. Three key advantages are attracting & retaining talent, employer tax benefits and the ability to maximize your own contributions.

But, there is one caveat to maximizing your contributions…

In order for a business owner to reach the IRS maximum limit ($69,000; $76,500 for people 50 and above in 2024) they will need to establish what’s called a 401(k) “Safe Harbor” plan.

Key Benefits for Safe Harbor

Allows Highly Compensated Employees (HCEs) to defer the current maximum of $23,000 (for 2024) of compensation

HCEs achieve maximum deferral limit regardless of Non-Highly Compensated Employees (NHCE) participation rates

Matching contributions are tax deductible to employer

Types of Safe Harbor

There are two types of Safe Harbor Plans: Traditional Safe Harbor and Qualified Automatic Contribution Arrangement (QACA) Safe Harbor. They both can either offer an employer matching contribution or a 3% nonelective contribution.

See the chart below to compare the key features of each.

Just like this summer heat, the deadline for implementing a Safe Harbor Plan for the 2024 Plan Year is coming in hot! Plan Sponsors must have the plan up and ready to accept contributions by October 1, 2024.

Let My Benefits Keep You Cool

Don’t let Safe Harbor deadlines catch you in a summer daze! At My Benefits, we recognize the importance of optimizing retirement plans to align with your business owner clients’ goals. Leverage our expertise and personalized approach to make the implementation of a 401(k) Safe Harbor plan as smooth as possible.

P.S. Thanks to SECURE 2.0, you can now convert your SIMPLE Plan into a 401(k) Safe Harbor Plan mid-year! Check out our blog for more details.