Benefits of a Safe Harbor Plan

Whether you are a new or existing Guideline client, a Safe Harbor plan comes with many great benefits and is considered a tax-favored plan by the IRS. 

Automatically Waive Burdensome Non-Discrimination Testing

A Safe Harbor plan generally exempts an employer from certain required annual nondiscrimination testing, including the Actual Deferral Percentage and Actual Contribution Percentage (ADP/ACP) tests and Top Heavy tests, which are designed to ensure plan benefits are fair and don’t discriminate in favor of business owners, officers, and highly paid employees. The consequences of failing one of these tests can include taxable refunds to highly paid participants, owners, and officers, as well as a mandatory company contribution to the company’s other employees. You can learn more about the implications of nondiscrimination testing here.      

Encourage Participation & Reward Employees For Saving

In addition to reducing the burden of year-end compliance testing, Safe Harbor contributions serve as an incentive to encourage more employees to participate in the plan. Your contributions also provide additional retirement savings to your valued employees. All Safe Harbor contributions are 100% vested, meaning the employee is immediately given absolute, non-forfeitable rights to the vested assets, and this right cannot be taken away.

If you are interested in setting up a Safe Harbor plan, you can contact Guideline client support and we are here to help! You can also check out our helpful blog article on Safe Harbor for more information.

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