Alliance Benefit Group of Michigan

30100 Telegraph Road, Suite 170, Bingham Farms, Michigan 48025 | Ph: 248-540-5300 | Fax: 248-540-5318

Safe Harbor 401(k) Plan

A safe harbor 401(k) plan is one under which an employer is able to avoid non-discrimination testing on employee deferrals by making a fixed, 100% vested contribution to eligible employees.

The contribution may be made as a match to each participant’s deferrals of 100% up to the first 3% of compensation and 50% of the next 2%, or as an employer non-elective contribution of 3% of compensation to all eligible participants. The employer has the option of limiting these contributions to non-highly compensated employees.

A written notice is required to advise participants of the use of the safe harbor election and the option selected. The notice should be provided within 30-90 days before the beginning of the plan year.

Employers that have historically had difficulty allowing key employees to defer as much as they would like and pass non-discrimination testing would benefit from this type of plan design.

Alliance Benefit Group, its subsidiaries, and all employees thereof, are not engaged in the practice of rendering legal services, accounting or other professional advice. Although care has been taken to provide accurate guidance, the preparer of this communication disclaims any implied or actual warranties as to the accuracy of any material herein and all liability with respect thereto.

IRS CIRCULAR 230 DISCLOSURE: As stated above, Alliance Benefit Group does not provide tax advice. To the extent this communication (including attachments), mentions or discusses any tax matter, it is not intended or written to be used, and cannot be used by the recipient or any other person, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party the matter addressed herein. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.