If a plan sponsor would like to change there plan to a safe harbour plan it must be communicated to employees prior to year end to be effective for the following plan year. One exception is new plans. Year end reviews should be completed well before year end.

s Oct. 1 rolls around, it is time for businessownersto make an important decision about the type of 401(k) plan they are going to offer employees. It is the annual deadline for setting up a Safe Harbor 401(k), a type of retirement plan that makes it possible for business owners to maximize their contributions to their accounts without running afoul of the IRS‘ nondiscrimination testing requirements for traditional 401(k) offerings.Retirement plan experts say Safe Harbor 401(k) programs offer a practical and efficient way for small employers to provide retirement benefits to their employees, including themselves. Using this type of 401(k) plan, business owners can max out their contribution ($16,500 per employee or $22,000 for employees over the age of 50) and receive additional savings through the match.”The Safe Harbor 401(k) does remove some of the perceived risk of compliance testing for small–business owners,” said Janice Nearen-Bell, vice president of human resource services sales at Paychex, a Rochester, N.Y.-based provider of payroll, human resources and benefits outsourcing solutions for small and mid-size businesses.

While any size of company can offer a Safe Harbor 401(k), it is geared toward small- business owners. Safe Harbor plans can be structured in two ways. One option is a dollar-for-dollar matching contributions for all participating employees on the first 3 percent of each employee’s compensation and a 50 percent match from 3 percent to 5 percent. The plan can also be structured to provide 3 percent to each eligible employee’s compensation, regardless of whether they participate in the plan. These plans could be expensive for larger businesses, which would likely have more participants.

Now is the time to determine changes to your 401(k) plan.

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