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2022 Safe Harbor 401(k) Deadline

2022 Safe Harbor 401(k) Deadline

August 25, 2022

October 1st is the deadline to establish New 2022 Safe Harbor 401K Plan

As the economy roars back from the early days of the Covid-19 pandemic, many business owners see the labor market tightening and are looking for new ways to retain top talent.

One common move for employers with a 401(k) is implementing a 401(k) match. For many small businesses, adding a “safe harbor” match provision. Safe harbor matches help business owners:

  1. Attract and retain top talent – Offering your employees a matching 401(k) contribution is a powerful recruitment tool. A Betterment for Business study found that nearly half of respondents said a company match was a factor in whether they accepted a new job.
  2. Improve financial wellness – Financial stress impacts employees’ ability to focus on work. By helping your employees save for retirement, you help ease that burden and potentially improve your company’s productivity and profitability.
  3. Save time and stress – Administering your 401(k) plan takes time – and it can become even more time-consuming and stressful if you’re worried that your plan may not pass nondiscrimination testing. Skip the tests altogether by electing a safe harbor 401(k).
  4. Reward your top earners – With a safe harbor 401(k) plan, you can ensure that you and your HCEs can max out your retirement contributions (without the fear that contributions will be returned if the plan fails nondiscrimination testing).
  5. Reduce your taxable income – Safe harbor contributions are tax-deductible like any employer contribution! Plus, you can receive valuable tax credits to help offset the costs of your 401(k) plan.

As a plan sponsor, your options to add a safe harbor match fall into two categories – 1) without automatic enrollment and 2) with automatic enrollment. Let’s look at these in order:

  1. Safe harbor matching contribution without automatic enrollment:
    1. Basic match – 100% on the first 3% of deferred compensation plus a 50% match on deferrals between 3% and 5% (4% total from the plan sponsor)
    2. Enhanced match – at least as generous as basic and cannot be based on more than 6% of compensation – a typical formula is 100% match of first 4% compensation
    3. Nonelective contributions – 3% to everyone, regardless of whether they are contributing
  2. Safe harbor matching contribution with automatic enrollment – a.k.a. Qualified Automatic Contribution Arrangement (QACA)
    1. QACA Match – 100% match on the first 1% of comp deferred, and 50% match on deferrals between 1% and 6% (3.5% total)
    2. QACA Nonelective – 3% to everyone, regardless of whether they are contributing


Plan sponsors have options when it comes to adding a safe harbor match, and you will want to see what makes the most sense for your 401(k) and your business. With the help of a trusted Financial Advisor, many small businesses have found that adding a safe harbor match has been a great way to retain top talent and improve their bottom line in a tight labor market. If you want to see how a safe harbor match benefits your plan, schedule a call today.