Safe harbor 401(k) plans are subject to employer contribution and participant disclosure requirements that don’t apply to traditional (non-safe harbor) 401(k) plans.

In exchange, a safe harbor plan can automatically pass the ADP/ACP test and satisfy the minimum contribution requirement when the top heavy test fails.

Because many small 401(k) plans (under 100 participants) have a hard time passing the ADP/ACP and top heavy tests, safe harbor plans are very popular with small businesses.

We receive a lot of questions from business owners about safe harbor 401(k) plans. In this guide, we answer common questions like:

  • What is a Qualified Automatic Contribution Arrangement (QACA)?
  • How to decide between a safe harbor and traditional 401(k) plan?
  • What are the consequences when the ADP/ACP and top heavy tests fail?
  • What % of small business 401(k) plans fail the ADP/ACP and top heavy tests?

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401(k) Must Reads

Five Reasons DOL (Almost) Prohibits 401(k) Cryptocurrency Investments

In a Compliance Assistance Release, the DOL warns 401(k) plan fiduciaries to “exercise extreme care” before including cryptocurrency options on a 401(k) plan’s investment menu.

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SECURE 2.0: Here We Go Again

On March 29, the House of Representatives voted 414-5 in favor of the Securing a Strong Retirement Act of 2022 – also known as SECURE Act 2.0. The article summarizes key provisions of the bill.

Click here to read more

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