The safe harbor 401(k) plan is like a traditional 401(k) plan; however, the main difference is that the employer is required to make fully vested contributions to the plan participants.
The company matches 100% on the first 3% of deferred compensation, plus a 50% match on the next 2% of deferred compensation
The company matches 100% of the employee on the first 4% of deferred compensation.
3% or more of the employee’s compensation made on behalf of all eligible employees, regardless of whether they make elective deferrals.
The safe harbor 401(k) plan is not subject to the complex annual nondiscrimination tests that a traditional 401(k) are subject to since all employees are receiving a safe harbor employer contribution benefit.
Both the traditional and safe harbor 401(k) plans can be utilized by companies of any size and combined with other retirement plans.