What Is a Safe Harbor Savings Account?
There are various types of 401(k) retirement plans for businesses to offer their employees. One option is the Safe Harbor 401 (k) plans. A Safe Harbor plan typically means more saving for employees and less hassle for employers.
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Identification
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The Safe Harbor plan allows employees a way to contribute a part of their salary to a 401 (k) plan. For instance, the maximum amount you may contribute is $16,500 to your plan, according to ING Direct.
Function
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The Safe Harbor plan also allows employers to contribute to your retirement plan.
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Significance
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For instance, your employer can choose between two contribution options with a Safe Harbor 401(k) plan. One option is to match, 100 percent, your contribution. The other option is give a non-elective contribution of 3 percent, according to ING Direct.
Benefits
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The Safe Harbor plans provide retirement income and automatic eligibility for new employees, according to State Farm.
Warning
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However, if you want to withdraw money for your Safe Harbor 401(k) plan before you reach 59 and 1/2 years old, there is a penalty. Typically this includes a 10 percent tax penalty and the requirement to pay federal income tax on the distribution amount.
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