A safe harbor 401(k) plan is a type of retirement plan that allows a company to avoid the regulations and expenses associated with nondiscrimination tests typically required of a 401(k) or other retirement account. Safe harbor 401(k) plans are similar to traditional 401(k) plans, but they must provide for employer contributions that are fully vested when made. Here are some key features of a safe harbor 401(k) plan:

• A safe harbor 401(k) plan provides all eligible plan participants with an employer contribution, which can take one of three forms: non-elective contributions, matching contributions, or a combination of both.

• Safe harbor plans allow businesses to avoid annual IRS nondiscrimination testing, which is used to ensure that the plan is fair and equitable for all employees.

• Safe harbor contributions must always be 100% vested, meaning employees will never forfeit any safe harbor contributions upon separation, regardless of their years of service.

• Safe harbor 401(k) plans require annual employer contributions to eligible employees.

• Safe harbor 401(k) plans can benefit small businesses by waiving certain IRS testing requirements, making it easier for owners and highly compensated employees to maximize contributions to their 401(k) plan.

• Safe harbor plans can help incentivize key highly compensated employees to continue their employment with a company instead of looking for more flexible benefit offers elsewhere.

Overall, a safe harbor 401(k) plan is a great way for employers to reward employees and simultaneously save themselves tons of administrative hassle.