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Avoiding Safe Harbor 401(k) Plan Compliance Traps: Effective Administration, Contribution and Vesting Requirements


Aug. 4, 2019
Recorded Online

IRS Examinations and Annual Testing, Correcting Failed 401(k) Plan, Employee Notice Requirements, Drafting Safe Harbor Provisions

This CLE webinar will provide guidance to ERISA counsel on the compliance challenges of safe harbor 401(k) plans. The panel will discuss key regulatory issues, compliance testing, notice requirements, effective safe harbor contribution provisions, and key planning methods to avoid compliance traps for plan sponsors.

The IRS rules require the assessment of a series of annual tests designed to measure whether a 401(k) plan disproportionately favors highly compensated employees. A properly structured and compliant safe harbor 401(k) plan is exempt from the IRS annual testing requirements allowing employers to avoid expensive corrections or refunding of 401(k) contributions.

A traditional 401(k) plan provides employers the option of making contributions on behalf of all participants subject to a vesting schedule or be immediately vested. IRS rules require that contributions made under a traditional 401(k) plan meet specific nondiscrimination requirements which are enforced by requiring the employer to perform the actual deferral percentage (ADP) and actual contribution percentage (ACP) tests annually. Failing either of these tests can result in unforeseen penalties, taxable refunds to HCEs, and require costly corrective measures to ensure that contributions do not discriminate in favor of highly compensated employees.

Safe harbor 401(k) plans are exempt from the ADP and ACP testing requirements and require employer contributions to be 100% vested to the member when made, among other plan rules. Also, safe harbor 401(k) can also avoid being subject to the top-heavy rules of Section 416 under certain conditions. ERISA counsel and advisers must have in-depth knowledge of complicated IRS rules, employee notice requirements, key safe harbor provisions, and other items that are essential to being exempt from IRS annual testing requirements.

Listen as our panel discusses the IRS annual testing requirements for 401(k) plans, contribution and vesting challenges, structuring safe harbor 401(k) strategies, and methods to avoid compliance traps for plan sponsors.


  • Traditional vs. safe harbor 401(k) plans; IRS testing requirements
  • Correcting failing 401(k) plans
  • Structuring effective safe harbor 401(k) plans
  • Employee notice requirements; content and timing issues
  • Additional contributions and Section 416 of the IRC
  • Best practices for effective administration for plan sponsors

The panel will review these and other key issues:

  • What are the IRS annual nondiscrimination test requirements for 401(k) plans?
  • What methods are available to correct 401(k) plans that fail IRS tests?
  • What are the key considerations and required provisions in structuring safe harbor 401(k) plans?
  • How to avoid content and timing pitfalls in employee notices?
  • How can you ensure that a safe harbor 401(k) is exempt from top-heavy testing under Section 416?


  • Bret Hamlin, Shareholder, Hill Ward Henderson
  • J. Rose Zaklad, Principal, Groom Law Group

More Information, How to Register

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