Safe Harbor 401(k)s

A Safe Harbor 401(k) allows you to maximize your contributions to your own account while also providing a "safe harbor" match or contribution to your employees as a percentage of their compensation.

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What is a Safe Harbor 401(k)?

The last thing you need is added complexity in running your business. A Safe Harbor 401(k) can be a complicated retirement plan option — so let us take the guesswork out of it.

With a Safe Harbor 401(k), the business owner must be willing to make required contributions. Any size business may find these plans attractive, but take a closer look if:

  • You have fewer than 25 employees.
  • You are open to making required employer contributions.

Safe Harbor 401(k): How it works

A Safe Harbor 401(k) lets you contribute the maximum amount to your own account. But you must also provide a "safe harbor" match or contribution to employees' accounts as a percentage of their compensation. This means you and your highly compensated employees can maximize tax-deferred contributions without the restrictions of a traditional plan that doesn't require matching.

Contribution features

All participants can defer up to 100% of compensation or the applicable limit shown below:


Participant defer limits



If you’re 49 or younger



If you’re 50 or older




Employers are required to make annual contributions to a Safe Harbor 401(k) plan. At minimum, an employer must:

  • Match employee contributions (100% of contributions for first 3% of compensation and 50% of contributions for next 2% of compensation) or
  • Contribute 3% of compensation for all eligible employees, regardless of whether the employee contributes.

Total employee and employer contributions cannot exceed the applicable limit below:

Total employee and employer contribution limits



If you’re 49 or younger



If you’re 50 or older




Contributions can be made on a traditional or Roth basis. Traditional contributions are made with pretax dollars, any earnings growth is tax-deferred and future withdrawals are taxed like income. Roth contributions are made with after-tax dollars and future, qualified withdrawals are tax-free.

Other things to consider

  • Employer contributions are immediately vested.
  • This type of plan can be complex and requires an administrator for compliance, plan maintenancecanno, recordkeeping, IRS Form 5500 filing and required testing.

Safe Harbor 401(k) deadlines

  • Setup deadline: 
    • You must establish the plan before contributions can be made by any participants, including owners. 
    • The last day to establish a plan for the current plan year is Oct. 1.
  • Contribution deadline: 
    • Participant contributions must be deposited as soon as feasible but no later than the 15th business day following the month they were withheld.

How we can help

An Edward Jones financial advisor can help you choose a retirement plan that fits your small business and helps attract and retain employees. Contact us to request a complimentary, no-obligation consultation.

Important Information:

This information is for educational purposes only. Edward Jones, its employees and financial advisors cannot provide tax or legal advice.