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Safe Harbor 401(k)s are best for businesses that have high employee turnover or too many plan assets among owners or highly-compensated employees.These businesses run the risk of violating annual compliance testing with a traditional 401(k), but are exempt if they qualify their plan for Safe Harbor – making it easier for owners and high-earns to contribute more.
Traditional 401(k)s have a number of benefits and drawbacks for small business owners to consider when deciding if 401(k) may be their best option.
Traditional 401(k)s have a number of advantages including: To read more about Traditional 401(k) costs from different providers, check out our article on the 6 Best 401(k) Companies for 2018.401(k) plans can be provided by Professional Employer Organizations (PEOs) like Justworks, HR benefits software including Gusto, or independent retirement providers like Human Interest, which uses technology to offer a low-cost administration service. Visit Human Interest One growing trend among retirement benefits is qualifying 401(k)s for Safe Harbor.
However, remember that 401(k)s have the highest administrative costs overall, and the IRS requires annual testing to ensure your plan is fair to employees.
The per-participant cost of a Traditional 401(k) is usually higher for small businesses than larger, established companies.
Typical 401(k) costs include: Unlike some IRA alternatives, 401(k) contributions come from both employers and employees.
Contributions are a combination of employee salary deferrals, employer matching, and profit-sharing payments by employers when they choose to contribute.The IRS has a strict process for setting up a 401(k).The effective date of a plan can be anytime, but employers must adopt the plan during the same tax year for which the plan is effective.In a 401(k), employees can contribute up to ,000 pre-tax each year through salary deferrals, employer matching, and profit-sharing.Employers are not required to match or profit-share if they don’t want.401(k)s best for employers who want flexibility and who have more than 8 employees.The costs of a Safe Harbor 401(k) are similar to a Traditional 401(k).Both require plan administration, bookkeeping, and annual Form 5500 filings.Human Interest’s technology allows it to streamline plan administration and generate cost savings for small business owners.Visit Human Interest With over 54 million Americans participating in more than 550,000 plans, 401(k)s are probably the most well-known type qualified retirement plan.Of all small business retirement plans, Traditional 401(k)s offer employers the most flexibility for matching.Employers can structure any matching formula they want (including profit-sharing) – or not match at all.