Super Comp & Safe Harbor 401(k) Plans

Plan description

    • Safe Harbor 401(k) is a 401(k) plan designed with a mandatory employer contribution but does not have discrimination testing.

    • A "Super Comp" Plan benefits owners who are closer in age and/or salary to their employees by combining the New Comparability Profit Sharing Plan with the Safe Harbor 401(k).

Key features

    • Incorporates the features of a New Comparability Profit Sharing Plan with the 401(k) Safe Harbor provisions.

    • Safe Harbor 401(k) permits employers to choose either a 3% profit sharing contribution or a 4% matching contribution on a 5% deferral. Employer contribution must be made each year to maintain Safe Harbor provisions.

    • Employees may defer without 401(k)-type discrimination testing.

    • All contributions must be 100% immediately vested.

    • Participant loans are available.

    • Effective in 2002, Safe Harbor plans with matching contributions are not considered top heavy.

    • Withdrawals are governed by the plan document and may be restricted.

Who can establish

Businesses, partnerships, S-corporations, C-corporations and nonprofit groups. (Governmental entities excluded)  Employers must provide a 30-day notice before establishing plan.

Annual contributions

    • Employees can defer up to $18,000 ($24,000 if age 50 or older) (refer to chart for progressive catch up contributions).

    • Deferrals and employer contributions cannot exceed the lesser of 100% of each employee's compensation or $53,000 per employee.  Catch-up deferrals are not included in this limit.

    • Total deductible employer contributions to the plan cannot exceed 25% of total eligible compensation.   Employer contributions do not include employee deferrals.

    • Maximum eligible compensation: $265,000.

QPA Annual fees

Due to the complexity involving the contribution calculation, third-party administrative services are required.  Contact Qualified Plan Administrators, Inc. to obtain a quote.

Amounts withdrawn from retirement plans are generally includable as taxable income in the year received and may be subject to tax penalties if withdrawn prior to age 59½.

S-corporations and C-corporations are two different types of legal structures, each of which is subject to different tax rules.

Subject to cost of living adjustments.

This information is not intended to be tax advice.  Please consult your tax advisor for complete information and its application to your particular situation. Unless specifically stated otherwise, any tax information presented is based upon federal income tax law. State and local income tax laws may differ from federal income tax laws.  Some states may not have conformed state income tax laws to the federal changes enacted by the Economic Growth and Tax Relief Reconciliation Act of 2001.

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