TYPES OF SAFE HARBOR CONTRIBUTIONS
- SAFE HARBOR NONELECTIVE CONTRIBUTION
A safe harbor nonelective requires at least a 3% safe harbor contribution to all eligible plan participants. A nonelective contribution is often the most cost-effective option for plans that are top heavy and make additional annual employer contributions.
- BASIC SAFE HARBOR MATCHING CONTRIBUTION
A basic safe harbor matching formula requires a match rate of 100% of employee deferrals up to 3% of compensation plus 50% of employee deferrals between 3%-5% of compensation, for a maximum match of 4% of eligible compensation.
- ENHANCED SAFE HARBOR MATCHING CONTRIBUTION
An enhanced matching formula must also provide a benefit equal to or greater than the maximum allowable basic safe harbor matching contribution (i.e. 4%). For instance, a match equal to 100% of deferrals up to 4% of compensation meets the enhanced safe harbor matching requirements.
- QUALIFIED AUTOMATIC CONTRIBUTION ARRANGEMENT (QACA)
An automatic enrollment feature automatically enrolls any eligible employee that fails to make an affirmative enrollment election in the plan at a specified deferral rate.