Unit 9: Safe Harbor 401(k)

Question 1

What are the three Safeharbor requirements?
“CAN”

Answer 1

One: plan must be amended to reflect safe harbor

Two: every year you will be required to make contributions to non-highly compensated employees

Three: Proper notice given to Participant each year

Question 2

In what manner are safe harbor contributions to be given to non-highly compensated employees? Three criteria

1) Must be non-discriminatory under what rule?
2) What Rule is not allowed?
3) Vesting

Answer 2

Must be non-discriminatory under 414s rules

No allocation requirement such as last day

100% vesting- subject to same deferral restrictions as elective deferrals

Question 3

Describe midyear adoption of Safeharbor for current year plans and prior year plans

Answer 3

Current year plans may mid adopt safe harbor up until 30 days prior to the end of the calendar year at the cost of a 3% non-elective contribution.

Prior your plans me adopt safe Harbor at the cost of 4% nonelective contribution by 12/31 of the year following

Question 4

New Current Year Safeharbor match plans must be amended prior to April 15 each year true or false?

Answer 4

False. New plans have up until October 1 of each year to be set up.

Question 5

Existing 401(k) Match plans must have their adoption agreement amended by what date in order to be set up for safe harbor?

Answer 5

They must be amended prior to January 1

Question 6

If adding a 401(k) to a profit share plan, what is the deadline for setting that up?

Answer 6

The 401(k) must be added to the profit share by October 1

Question 7

When are annual safe Harbor contributions due to the plan?

Answer 7

Safe harbor contributions are due within 12 months after the end of the plan year.

Question 8

When are Safeharbor contributions due to a plan that does not have an annual contribution frequency?

Answer 8

They are due by the last day of the following quarter.

Question 9

When are safe Harbor notices due to Participants?

Answer 9

They are due 30 to 90 days before the beginning of the year

Question 10

What eight pieces of information should a Safe Harbor notice contain?

Answer 10

1) Amount of Safeharbor Harbor
2) other available contributions
3) name of other plans employer is making contributions to
4) how to make deferrals
5) withdrawal & vesting info
6) when deferrals be changed
7) type of compensation that can be deferred
8) how to get additional information

Question 11

What are the four conditions that would cause a SH plan to lose its top-heavy exemption?

“MANS”

Answer 11

1 allocations of forfeitures
2 NEC, other than safe Harbor
3 matching that does not satisfy safe Harbor
4 no safe harbor contribution made to Participants

Question 12

What are five ACP Safe Harbor rules?

Answer 12

1) cannot require employees to defer more than 6% to attain full match
2) discretionary match, cannot be more than 4% of Compensation
3) HCEs can’t get a better match than non-HCEs
4) No Last Day
5) IF After tax contributions are allowed THEN the plan will always be subject to the ACP test

Question 13

What is the maximum QACA auto escalation cap?

Answer 13

15%

Question 14

What does EACA allow?

Answer 14

This provision allows participants 90 days to request a refund of their deferrals plus or minus market volatility.

Question 15

What happens to match during an Opt Out?

Answer 15

It is forfeited to the plan

Question 16

What are the five rules pertaining to eliminating safe Harbor in year?

Answer 16

1) must provide 30 day notice to Participant
2) Plan is amended to reflect removal of Safeharbor
3) participants have time to change their deferrals
4) Safeharbor contributions are made through effective date of the amendment
5) allowed if employer is operating at an economic loss or notice was given that stated there was a possibility of a mending during the year to remove safe Harbor