IRS removes 401(k) safe harbor restrictions.

Business Insurance, January, 2000 by Geisel, Jerry

WASHINGTON-New Internal Revenue Service guidance on requirements employers must meet to offer 401(k) safe harbor plans removes a major administrative hassle and expense for employers that want to offer the plans. Under an earlier IRS notice-now revoked-employers' matching contributions had to satisfy the safe harbor based on employees' compensation for the entire year.

Problems could occur when employees during a year deferred more than what was needed to get a full employer match and at other times deferred less than was needed for the full match. Benefit consultant PwC Kwasha offers an example that illustrates how the requirement to "true up" can add to the cost of offering a 401(k) safe harbor plan. The example assumes a 401(k) safe harbor plan matches...

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