When you are a business owner, your priority is to generate revenue in your company. You want to hire the best talent to maximize your profits through improved performance and productivity. One way to attract high-quality personnel is by offering an attractive retirement package.
You can reward your staff with high retirement contributions through a Safe Harbor 401(k). It also works for you by automatically passing the nondiscrimination test or avoiding it altogether. Therefore, business owners and highly compensated employees (HCE) can make considerably higher contributions.
Read on to see how you can grow your retirement fund using Safe Harbor 401(k).
How to Maximize Your Payments
A Safe Harbor 401(k) operates like a traditional 401(k) with a compulsory contribution by the employer. By dutifully contributing to your employees’ retirement savings, the IRS rewards you by exempting your 401(k) from nondiscrimination testing.
The test is a taxing struggle which businesses with the traditional 401(k) face every year. Its role is ensuring that employers treat all employees equally regardless of their pay or rank in the organization. The testing rules often limit the amount that owners and HCEs can save.
With nondiscrimination testing out of the way, you avoid the administrative roles and costs associated with running a 401(k). You’re also free to make heftier contributions for yourself and selected workers.
To meet the legal threshold of a Safe Harbor 401(k) plan, you must select any of the following strategies:
Elective Basic Match: Match 100% of all employee contributions up to 3% of their pay, and 50% match of the next 2% of the employee’s compensation
Elective Enhanced Match: Match 100% of all employee contributions up to 4% of their compensation
Non-Elective: Contribute 3% of every employee’s compensation whether or not they make contributions
The Bottom Line
To save up to $56,000 annually for yourself and the best employees, consider utilizing a Safe Harbor 401(K). Let Life Inc. Retirement Services oversee your 401(k) plan as you concentrate on managing your business.
Contact us today, and our team of 401(k) experts will happily address your concerns.