Retirement Strategies LLC, Little Chute Wisconsin

Safe-Harbor Plans

A Safe-Harbor Plan is a 401(k) Plan where the employer is required to make a mandatory match contribution or a non-elective contribution of 3% of each employee’s compensation. Safe-Harbor Plans allow the employer to avoid certain IRS nondiscrimination rules and the safe harbor contributions can not be subject to a vesting schedule.

Employers that may benefit most from a Safe-Harbor Plan design include (a) employers with highly paid employees (HCE) unable to contribute the full 401(k) dollar limit because of low participation rates of the lower-paid employees (NHCE), (b) employers already making employer contributions at or near the safe harbor levels, (c) employers required to make top-heavy minimum contributions and (d) employers with relatively low employee turnover.

DESIGN FEATURES

Who May Adopt?

Employers of all sizes

Employee Eligibility Requirements

Maximum Requirements:
	Age 21 and 1 year (1,000 hours) of service
* Less restrictive requirements allowed

Employee Deferral Contributions

Limited to:
	$15,500 (2008)
	$16,500 (2009)

Employer Matching/QNEC Contributions

Employer is required to make either a 4% matching contribution or a QNEC contribution of 3% of each employee's compensation. Plans can not require eligible employees to be employed on the last day of the plan year or complete a number of hours in a plan year to get these contributions.

Employer Profit Sharing Contributions

Discretionary formulas allowed based on either:
	Non-integrated (or comp-to-comp) formula, or
	Integrated (social security wage base) formula

Plans may also provide that employees must be employed on the last day of the plan year and must work up to 1000 hours to receive a contribution.

Maximum Annual Contributions

Employer Contributions are limited to:
	25% of eligible participant wages

Employee Annual Additions are limited to:
	Lesser of $49,000 or 100% of compensation (2009)

Are Catch-up Contributions Allowed?

Yes, limited to:
	$5,500 (2008)
	$5,500 (2009)

Contribution Deadlines

Employee Deferral Contributions
	Must be deposited by the 15^th business day following the month of deferral, or sooner if administratively feasible - the DOL has indicated that contributions made within 7 days will not be considered late

Employer Contributions
	Must be made by the employer’s tax filing deadline, including extensions

Vesting Schedule

Employee Deferral Contributions are always 100% vested

Employer Matching/QNEC Contributions are always 100% vested

Employer Contributions may be subject to a vesting schedule. Examples of possible vesting schedules include a three (3) year cliff (0,0,100) or a six (6) year graded (0,20,40,60,80,100)

Withdrawals and Loans

Withdrawals permitted only upon termination, death, disability or retirement.

Plans may elect to allow hardship or in-service withdrawals

Plans may elect to allow plan loans and must specify the parameters under which a participant can take a loan.

Administration & Reporting Requirements

Top-heavy and non-discrimination testing required

Form 5500 filing required

Fidelity Bond required