Safe Harbor 401(k) Plan Workshop: Plan Design, Troubleshooting, and Correction

ASPPA [American Society of Pension Professionals & Actuaries]

Speaker: Stephen Forbes

IRS Program Number: CZTXU-Q-01495-22-O

Description: 

Over the past 20+ years, Safe Harbor 401(k) Plans have evolved into the most popular 401(k) plan. However, many practitioners are unaware of how to effectively design a Safe Harbor 401(k) Plan to maximize its advantages, particularly how to use the ACP safe harbor features. Safe Harbor 401(k) Plans also can be a great fit with a Cross-Tested Plan. In addition, we will discuss how to utilize the special rules that affect mid-year situations, including acquisitions transactions, plan amendments and plan terminations. Finally, we will address how to correct a Safe Harbor 401(k) Plan that runs afoul of the rules.

Review of the Safe Harbor 401(k) Plan rules. Plan documentation requirements; timing; safe harbor contribution options; compensation choices; short plan year; plan year and post-plan year amendments (SECURE Act changes); notice requirements; allocation requirements; distribution restrictions; vesting rules.

ACP Safe Harbor requirements. Matching formulas in addition to ADP safe harbor matching formula; vesting; discretionary matching formula; fixed matching contribution formulas; multiple matching formulas; timing; vesting rules; four regulatory requirements.

Designing a Safe Harbor 401(k) Plan: Choosing the safe harbor contribution (match vs. nonelective); choosing compensation definition; design options (safe harbor with profit sharing contribution, integrated contribution formula, and additional matching contributions); top heavy exempt plan design.

Triple-Stacked Match Design: Designing the matching formulas; backing into the matching formulas; where to use; designing formulas to avoid annual amendments; worst case scenario; comparison with cross-tested plan design.

Early Eligibility Design: Early eligibility design for deferrals; application of otherwise-excludible employee rule; effect on top-heavy exemption, excluding part-time employees.

Combination Safe Harbor 401(k) and Cross-tested Plans. Disaggregated plans (nonelective, match and elective deferrals); rate group testing for nonelective contributions; required aggregation if using the average benefit test; minimum gateway; safe harbor 401(k) (nonelective vs. match); contributions that do “double duty;” Safe Harbor 401(k) Plan with a Cash Balance Plan.

Correction of Safe Harbor 401(k) Plan: Failure to provide notice; failure to make quarterly matching contribution; improper exclusion; failure to implement deferral election; self-correction vs. VCP.

Objectives:

• Design a Safe Harbor 401(k) Plan.
• Utilize multiple matching formulas that are safe harbor
• Correct a Safe Harbor 401(k) Plan failure
• Apply early eligibility to a Safe Harbor 401(k) Plan.
• Design a combined cross-tested and safe harbor 401(k) plan.
• Review other design and testing alternatives

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