Q.
What is a safe harbor 401(K) plan?
A.
A Safe Harbor 401(k) is a 401(k) plan that automatically satisfies the nondiscrimination rules for
elective deferrals and employer contributions. For a 401(k) plan to be considered a safe harbor plan,
employers must satisfy certain contribution, vesting and notice requirements.
Q.
Who is the best target organization?
A.
The PLAN4TEN isn't for all companies. An ideal candidate:
- Has 2 to 10 total number of employees in the organization
- Is willing to fund employer safe harbor contributions on a per-pay-period basis
Q.
What if the company has more than 10 total employees?
A.
If the company has more than 10 total employees, the PLAN4MOST program is designed to satisfy
their needs.
Q.
What are the mandatory employer contribution requirements for the PLAN4TEN?
A.
PLAN4TEN has been designed to satisfy nondiscrimination requirements. Employers can choose
between two safe harbor contribution options as defined below:
- An employer matching contribution of 100% of employee elective contributions on
the first 4%, 5% or 6% of compensation
- An employer non-elective contribution of 3% of compensation for all eligible employees
Both of these accounts are 100% vested and are required to be funded on a per-pay-period basis.
Q.
Does the PLAN4TEN allow for a profit sharing contribution?
A.
Yes, PLAN4TEN allows for the employer to make discretionary profit sharing contributions on either a
per-pay-period basis or annually at the end of the year. The profit sharing contribution is subject to a
vesting schedule. The profit sharing contribution component can also be integrated with Social
Security without incurring additional fees.
Q.
What type of enrollment materials are needed?
A.
Enrollment is handled online and no hard copy information is disbursed.
Q.
What are some of the plan design features of PLAN4TEN?
A.
PLAN4TEN is a standard offering that allows you to leverage a cost effective retirement plan. The
PLAN4TEN program:
- Allows for employee elective and catch-up contributions
- Allows for up to 2 outstanding loans
- Allows for either an employer safe harbor matching contribution or a non-elective contribution
- Allows for rollovers from other qualified retirement plans
Q: Are any tax credits available to offset 401(k) plan fees?
A: Yes. In many cases, you may be eligible to receive a tax credit for 50% of your setup and annual administration fees or $500 (whichever is less). This credit can be taken each year for the first three years of the 401(k) plan. This credit may be taken in addition to any tax deductions you may be eligible to take for plan contributions.
To take this credit, you must employ at least one person who is not considered to be a highly-compensated employee (defined as a person who owns greater than 5% of the company or who earns more than $100,000 per year). In addition, you must employ fewer than 100 persons who earned more than $5,000 in the previous year. For additional details about this credit or to confirm that you are eligible, please consult your accountant or tax adviser.
Q.
What if my business grows beyond 10 total employees?
A.
The PLAN4TEN is specifically designed for organizations with 2 to 10 total number of employees. If
your business grows beyond the 10 allotted employees, you will be migrated to the PLAN4MOST
program and the applicable fee structure during the next billing cycle.
Q.
When does the PLAN4TEN have to be established?
A.
The plan must be established at least three months before the end of the plan year. Plan setup date
requirements are contingent on the plan type being adopted and whether or not it is an existing or
startup plan. Specific deadlines are set prior to the end of the year.
This information does not constitute tax advice. Please consult your tax adviser for specific tax information.
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