Participating in your 401(k) as an owner, officer, or highly compensated employee

As discussed in our primer on nondiscrimination testing, given the significant tax benefits of 401(k), a plan could fall into the trap of being almost exclusively enjoyed by company owners and officers. While the IRS permits participants to defer up to $19,500 (or $26,000 if the participant is over age 50) of compensation and receive additional employer contributions up to a combined total of $57,000, small business owners often overlook the nondiscrimination rules that limit contributions of certain owners, officers, and other Highly-Compensated Employees (HCEs) if they don’t offer a Safe Harbor plan

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