![]() Employees can defer immediately but aren’t eligible for a matching contribution until after one year of service is completed.Forfeitures are allocated to participants in the same manner as nonelective contributions, or.The plan allows for a discretionary nonelective contribution to be made and one is actually made,.However, a safe harbor 401(k) with matching contributions isn’t exempt from being top-heavy if: If the plan is making a nonelective contribution of 3% to all employees, it automatically satisfies the top-heavy contribution requirement. However, a common question that arises when considering this move is: Can a safe harbor 401(k) become top-heavy?Īccording to the IRS, “A plan is top-heavy when the owners and most highly paid employees (‘key employees’) own more than 60% of the value of the plan assets.”Ī safe harbor 401(k) that has only elective deferrals and safe harbor matching contributions is generally exempt from being top-heavy. Some employers may be able to automatically pass nondiscrimination testing by creating a safe harbor 401(k) plan. Among the biggest challenges organizations face when implementing a 401(k) is managing the complex array of IRS rules for nondiscrimination testing regarding elective deferrals and matching contributions. Policies, Procedures & Internal ControlsĪ 401(k) plan, or some other type of retirement savings vehicle, has become an imperative for most employers.Financial Institution Credit Review Services.Financial Institution Compliance Services. ![]() Fraud Detection & Prevention (Forensics).System & Organization Controls (SOC) Reporting.Financial Statement Compilation & Preparation Engagements.Department of Housing and Urban Development Audits. ![]()
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