The typical QACA match is 100% on the first 1% and 50% on the next 5% (3.5% total). Another benefit of QACAs is that the employer match is lower (3.5% vs. QACAs require employers to automatically enroll employees into the plan, but add the ability to implement a 2-year cliff vesting schedule. QACA plans are a great choice for employers that want a Safe Harbor but also want to vest contributions. Qualified Automatic Contribution Arrangement (QACA): While enhanced Safe Harbor is more flexible, there are a number of additional requirements to keep in mind (outlined in 2023 Definitive Guide to Safe Harbor 401(k) Plans). For example, employers may match 100% of the first 6% or contribute 10% of pay for every eligible employee. Enhanced Safe Harbor:Įnhanced Safe Harbor contributions must also vest immediately, however, employers can structure their contribution to be more generous than the traditional Safe Harbor plan. Employers have two choices on how to make contributions:ģ% Non-elective: Contribute 3% of every eligible employee's pay to the 401(k) (i.e., a non-elective contribution) Ĥ% Match: The traditional Safe Harbor match is a 100% match on the first 3% and a 50% match on the next 2% employee save (i.e., 4% in total). ![]() Employer contributions must also be 100% vested immediately. Traditional Safe Harbor:Ī traditional Safe Harbor plan requires employers to contribute between 3% and 4% of eligible employee pay to the 401(k). There are several types of Safe Harbor 401(k) plans, each with its own unique features and requirements, one thing they have in common is you need to decide between a Safe Harbor Match and a Safe Harbor Non-elective contribution. Many employers choose a Safe Harbor plan so that they can avoid the headaches and risks of annual nondiscrimination tests.
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