WHAT ARE THE BENEFITS OF THE SAFE HARBOR 401(K) PLAN DESIGN? As mentioned earlier, the safe harbor 401(k) plan design may provide relief from the ADP and ACP nondiscrimination tests and allow the higher paid employees and owners to maximize their contributions. With the new timing options for adding a safe harbor feature, it is now possible to satisfy the ADP and ACP tests with safe harbor contributions after the results of these tests are available. There are other benefits that should also be considered. A 401(k) plan may be deemed to pass the “top-heavy” compliance test by satisfying the safe harbor plan requirements. In a 401(k) plan that does not use the safe harbor design, if more than 60% of plan assets are in the accounts of the company’s key employees, an additional contribution may have to be made on behalf of the non-key employees. The only caveat here is that if an employer decides to provide any additional contributions beyond those required to meet the safe harbor requirements, then the top-heavy test needs to be satisfied. Another benefit of this plan design is that safe harbor contributions can offset other employer contributions, such as the required minimum contribution to satisfy the topheavy test or the minimum gateway contribution for cross-tested employer profit sharing contributions. The safe harbor design may not be a perfect fit for every employer plan; however, it is certainly a feature that is worth exploring — especially for employers that struggle with passing the ADP and ACP compliance tests. Brett J. Ashton Kay Dee Baird John B. Baxter Julia A. Carpenter Maria M. Vladimirova Michael J. Messaglia Nicole R. Finelli Michael E. Williams PARTNER PARTNER PARTNER OF COUNSEL PARTNER SENIOR ASSOCIATE PARTNER PARTNER 317.238.6291 bashton@kdlegal.com 317.238.6306 kbaird@kdlegal.com 317.238.6311 jbaxter@kdlegal.com 317.238.6273 jcarpenter@kdlegal.com 317.238.6374 nfinelli@kdlegal.com 317.238.6268 mvladimirova@kdlegal.com 317.238.6249 mmessaglia@kdlegal.com alucas@kdlegal.com 317.238.6220 mwilliams@kdlegal.com Financial Services Team 20+ YEAR PARTNERSHIP WITH INDIANA BANKERS ASSOCIATION Years But Who’s Counting? OVER 20 Krieg DeVault LLP has been involved in every major event that has shaped the evolution of Indiana’s financial institutions. In addition to leading commercial and investment banks, our clients include specialty finance companies, insurance carriers and agents, broker-dealers, and investment advisers. www.kriegdevault.com © 2024 Krieg DeVault LLP. This constitutes attorney advertising. Krieg DeVault LLP, Indianapolis, IN, is responsible for this content. Jeffrey L. Ledbetter OF COUNSEL 317.238.6216 jledbetter@kdlegal.com Alexus D. Lucas ASSOCIATE 317.238.6381 Anna Noble, QKA, QPA, TGPC, CIP ERISA Consultant Ascensus Anna.Noble@Ascensus.com Ascensus is an associate member of the Indiana Bankers Association. Anna assists clients with technical compliance questions through Ascensus’ 800 Consulting Service, instructs internal training, prepares plan documents and plan document reviews. Her expertise includes employer-sponsored retirement plans, such as 401(k) plans and 403(b) plans, SEP plans, SIMPLE IRA plans, as well as Traditional IRAs, Roth IRAs, Coverdell education savings accounts and health savings accounts. HUMAN RESOURCES, CONT. 28 HOOSIERBANKER
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