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Avoiding Safe Harbor 401(k) Plan Compliance Traps: Effective Administration, Contribution and Vesting Requirements

IRS Examinations and Annual Testing, Correcting Failed 401(k) Plan, Employee Notice Requirements, Drafting Safe Harbor Provisions

Recording of a 90-minute premium CLE webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Tuesday, August 6, 2019

Recorded event now available

or call 1-800-926-7926

This CLE course will provide guidance to ERISA counsel on the compliance challenges of safe harbor 401(k) plans. The panel will discuss key regulatory issues, compliance testing, notice requirements, effective safe harbor contribution provisions, and key planning methods to avoid compliance traps for plan sponsors.


The IRS nondiscrimination rules require a series of annual tests designed to measure whether a 401(k) plan disproportionately favors highly compensated employees. A properly structured safe harbor 401(k) plan is exempt from the IRS annual nondiscrimination testing requirements. This structure allows employers to avoid expensive corrections or refunding of 401(k) contributions.

A traditional 401(k) plan provides employers with significant flexibility in determining the amount of contributions (if any) to be made on behalf of all participants. That flexibility is limited by IRS rules requiring that traditional 401(k) plans meet specific nondiscrimination requirements, including the requirement to perform the actual deferral percentage (ADP) and actual contribution percentage (ACP) tests annually. Failing either of these tests can result in costly corrective measures, including taxable refunds to HCEs or additional contributions to ensure that the plan does not discriminate in favor of highly compensated employees.

Safe harbor 401(k) plans are exempt from the ADP and ACP testing requirements. Among other rules, the safe harbor 401(k) plan rules generally require employer contributions to be 100% vested. Also, under certain conditions, safe harbor 401(k) plans can also avoid being subject to the top-heavy rules of Internal Revenue Code Section 416. ERISA counsel and advisers must have in-depth knowledge of complicated IRS rules, employee notice requirements, key safe harbor provisions, and other items that are essential to being exempt from IRS annual testing requirements.

Listen as our panel discusses the IRS annual testing requirements for 401(k) plans, safe harbor 401(k) design options, including contribution and vesting rules, and methods to avoid compliance traps for plan sponsors.



  1. Traditional vs. safe harbor 401(k) plans
  2. IRS nondiscrimination testing requirements & consequences of failed testing
  3. Structuring effective safe harbor 401(k) plans
  4. Employee notice requirements; content and timing issues
  5. Additional testing considerations
  6. Best practices for effective administration for plan sponsors


The panel will review these and other key issues:

  • What are the IRS annual nondiscrimination test requirements for 401(k) plans?
  • What methods are available to correct 401(k) plans that fail IRS tests?
  • What are the key considerations and requirements in structuring safe harbor 401(k) plans?
  • How to avoid content and timing pitfalls in employee notices?
  • How can you ensure that a safe harbor 401(k) is exempt from other testing rules, including top-heavy testing under IRC Section 416?


Hamlin, Bret
Bret Hamlin

Hill Ward Henderson

Mr. Hamlin is a Shareholder in the firm’s Executive Compensation & Employee Benefits Group. He practices...  |  Read More

Zaklad, J. Rose
J. Rose Zaklad

Groom Law Group

Ms. Zaklad advises clients on the design and administration of tax-qualified and nonqualified retirement plans. She...  |  Read More

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