Safe Harbor 401K for Highly and Non-Highly Compensated Employees
Author: Julz Prestley
Employers that operate safe harbor plan are sure that they are providing best plan for both employees and themselves. On condition that this plan operates in guide lines, it is stated that these employers satisfy the ADP/ACP nondiscrimination tests and judged to not offer top heavy. Which means with this plan it permits the HCE or Highly Compensated Employees to defer larger amount of money in the plans with non-highly compensated employees rank.
In this Safe Harbor 401K it is known that there are two types of contributions that will always be 100% vested. Those are Safe harbor matching and non-elective contribution. There are other things that are under the vesting agenda, which are contribution of regular matching and discretionary profit sharing.
The other type of plan is that 401K Plan. This traditional plan is popular because employees are allowed to switch a part of their wages into 401K saving accounts. This saving account is reserved for their retirement at the same time as reducing their current tax fees. In this case employees are not paying any income tax from their wages until they withdraw the fund outside 401K in their future. Employees are allowed to purchase company’s stock and bonds as the alternative of investment. Some other time they also can make mutual fund that the profit is shared between the participants.