What Is Safe Harbor Retirement?
Knowing that you have a substantial retirement plan is one of the things that makes you look forward to ending a fulfilling career when the time is right. That's why starting a safe harbor retirement plan is likely to be a good financial move for you and your family.
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Identification
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A safe harbor is a 401(k) plan that allows employees to set aside a portion of their salaries in an account to be saved for retirement. Employers have more leeway in setting up safe harbor plans and there are not as many worries about discriminating in favor of better-paid workers as there are with traditional 401(k) plans.
Employers
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An employer can choose to contribute the same monetary amount as the employee to the safe harbor plan, or can give a different amount, but is not required to contribute. The money that employers contribute is tax-deductible.
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Eligibility
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Employees must be at least 21 to start a safe harbor retirement plan, have worked at the company for at least a year and put in at least 1,000 hours in that year.
Exclusions
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In general, people who belong to a worker's union or are not residents of the United States and have no source of income from the United States are not permitted to start a safe harbor plan.
Others
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People in business partnerships or limited liability corporations, or who are sole proprietors, can establish a safe harbor retirement plan.
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