What Are the Upcoming Safe Harbor Deadlines?
Did you know that Oct. 1, 2023 is the deadline to establish or update a 401 (k) with a safe harbor matching contribution for this year?
As a business owner, you are dedicated to taking care of your employees. There are many effective retirement programs to offer your employees. Are you aware of these upcoming deadlines?
October 1, 2023 is the latest effective date for a business owner to establish a new plan designed with a safe harbor matching contribution for 2023.
December 1, 2023 is the last date to notify employees if you offer an existing 401(k) plan but want to include a safe harbor matching contribution for next year.
December 1, 2023 is the last date to elect the safe harbor 3% non-elective contribution to your existing 401 (k) for 2023.
Here is a checklist to consider:
- Consider a safe harbor plan (see description below)
- Work with an Oppenheimer Financial Advisor to explore if safe harbor 401 (k) plans are best for you and your employees
- Decide if you will add safe harbor to your 401 (k) or will launch a new plan for your employees
- Communicate to employees by the deadline
What is a safe harbor 401(k) plan?
Generally, 401(k) plans that cover non-owner employees are subject to non- discrimination testing that ensures contributions are not skewed unfavorably toward business owners or other key or highly compensated employees. Plans that are designed with a “safe harbor” automatically pass these testing requirements. The safe harbor requires that specific plan features be included. Employers are required to make annual contributions that are determined under a matching formula or under a non-elective (e.g. profit sharing) formula. In addition, the employees must receive 100% full and immediate vesting on those contributions.
If the employer wishes to elect a safe harbor matching contribution they must notify the participants prior to the start of each plan year. The matching formula must be at least 100% of each employee’s contribution up to 3% plus 50% of the next 2% of the employee’s contribution (creating an effective 4% match for employees deferring at least 5% of their pay).
The SECURE Act provides that an employer may adopt a 3% non-elective contribution safe-harbor retroactively if the amendment is adopted 30 days before the end of the plan year (or, if the non-elective contribution is 4% or more, if it is adopted by the end of the following plan year). This contribution must be made on behalf of every employee who is eligible for the plan (even for employees who do not defer any salary to the plan). There is no notice requirement for plans electing the non-elective safe harbor contribution.
Click here to find an Oppenheimer financial professional who can help you determine the best retirement plan for you and your employees.