Upcoming Deadline for Safe Harbor 401(k) Plans

My friend, Courtney Mann, sent me this reminder today.  His firm is a third party administrator.

As we approach the fourth quarter, we wanted to remind you of an important deadline that is often overlooked.

In order to install a new 401(k) plan with a Safe Harbor feature, the IRS requires a plan year of at least three months. As a reminder, a Safe Harbor provision eliminates discrimination testing on salary deferrals, thus allowing the highly-compensated to defer the maximum without restriction.

In other words, if your clients are in a position to contribute the maximum salary deferral in 2010 — and they employ non-highly compensated staff — then your client may need a Safe Harbor design.

Such a plan would have to be in place by September 30, 2010.

As always, all other plans — such as traditional 401(k), Profit Sharing, and Defined Benefit plans – must be written and adopted by December 31, 2010 to be effective for 2010.


About Christopher Hessenflow

Christopher Hessenflow is a financial planner in the Chicago area. He works with all sorts of people who are much more interesting than he is. He enjoys his career which lends him time to think and, sometimes, be creative. Chip was born bald.
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