As noted earlier, a key attraction to the Safe Harbor 401(k) plan design is that, provided the 401(k) plan satisfies specific criteria regarding contributions, vesting and employee information, these plans are exempt from ADP and/or ACP nondiscrimination testing.
What's more, Safe Harbor plans allow Highly Compensated Employees to defer the maximum amount of compensation permitted by law. Accordingly, Safe Harbor plans may be advantageous for employers that have a large number HCEs looking to maximize their contributions. Exemption from ADP and/or the ACP testing means that Highly Compensated Employees may make the maximum deferral without concern as to the consequences if the plan fails these tests.
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