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QKA-1 COURSE 9 SAFE HARBOR 401(K) QUESTIONS & ANSWERS ALREADY SCORED A+
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QKA-1 COURSE 9 SAFE HARBOR 401(K) QUESTIONS & ANSWERS ALREADY SCORED A+
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QKA-1 COURSE 9 SAFE HARBOR 401(K)QUESTIONS & ANSWERS ALREADY SCORED
A+
What would we have to change in order to become a safe harbor?
There are three requirements that you must satisfy to become a safe harbor?
Answer - 1) The plan would have to be amended to reflect the Safe Harbor
provisions
2) Every year you will be required to make a contribution (either match of non-
elective) to the NHCEs. This contribution is referred to as Safe Harbor
Contribution
a. The compensation used for the Safe harbor contributions must be
nondiscriminatory under the 414(s) rules (this will be discussed in another
module).
b. There cannot be allocation requirements (hours of service or last day
provisions) for the Safe Harbor contributions
c. There contributions must be 100% vested and subject to the same deferral
restrictions as elective deferrals.
3) You would have to give a notice to employee every year to describe their
rights under the plan.
Plan document requirements for safe harbor: Answer - - The plan document
must include Safe harbor provisions.
- These provisions must be in place prior to the beginning of the plan year
- This means you can't add the Safe Harbor 401(k) provisions for the current
year.
- We could amend your plan this year to be a Safe Harbor plan next year.
, If establishing a new 401(k) plan, then in order to be a Safe Harbor plan, the
plan must be _____________________________ For example, if you want a
calendar year Safe Harbor plan you can adopt it as late as October 1st of the
first plan year. Thus it would be in effect for the period October 1 - December
31. Answer - adopted and effective at least three months before the end of the
plan year.
If adding a 401(k) feature to an existing profit sharing plan, then in order to be
a Safe Harbor plan, the feature must be Answer - adopted and effective at
least the three months before the end of the plan year.
Typically, Safe Harbor plan have additional Answer - costs and less flexibility
The advantage of adopting a Safe Harbor plan is to Answer - avoid testing
requirements
The Safe Harbor provisions must be adopted and the plan document amended
prior to the Answer - start of the plan year to satisfy the Safe Harbor
requirements.
One is to make a non-elective contribution of at least 3% of compensation to
the NHCEs. The contribution must be made to all Answer - NHCEs who are
eligible to defer regardless of how many hours thye have worked or whether
they are employed at the end of the plan year.
You are allowed but not required to Answer - provide the Safe Harbor
contribution to the HCEs as well.
The Safe Harbor Contribution will replace the Answer - top heavy contribution
you're currently making.
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