Safe Harbor Plans Remain Popular Alternative

Safe Harbor Plans Minimize Contribution Testing Requirements

A Safe Harbor 401(k) plan is a simple and popular alternative for businesses. Unlike traditional 401(k) plans, Safe Harbor plans eliminate annual testing requirements and enable highly compensated employees to contribute the maximum amount to their 401(k) accounts without the risk that their contributions might need to be returned due to a testing failure.

Safe Harbor 401(k) plans do, however, come with their own set of requirements around when they may be established or modified.

Considering a Switch?

Plans that are not currently operating with a Safe Harbor plan design may wish to consider switching to a Safe Harbor plan design.


Plans wishing to become Safe Harbor plans for a future calendar year must notify their Account Manager by the deadline, which is set each year.

Confirm the Safe Harbor Plan Design Each Year

Every year, plan sponsors must decide whether to continue to use a Safe Harbor plan design. Plans currently designated as Safe Harbor plans must notify their Account Manager of their intent to maintain Safe Harbor status (or not) for a future calendar year by mid-November.

Two Flexible Plan Design Options

Plan sponsors can choose between a regular Safe Harbor plan or an Automatic Contribution Safe Harbor plan, the key features of which are summarized in the table below.


Safe Harbor

Automatic Enrollment Safe Harbor

Automatic Enrollment


Automatically enrolls new and/or current employees with a 3%-10% contribution rate

Employer Contribution

Basic Match – 100% match on the first 3% of compensation deferred, plus 50% match on deferrals between 3% and 5% of compensation


Enhanced Match – Must be at least as generous as the basic match formula

Choice #1 – 100% match on the first 1% of compensation deferred, plus 50% on the next 5% of compensation deferred


Choice #2 – 3% Employer Non-Elective Contribution

Vesting of Company Match

100% immediate

100% after no more than two years

Eligible for In-service Withdrawals

No, unless age 59½ or older

No, unless age 59 ½ or older

Eligible for Hardship Withdrawals



Required Notices for Participants 30 Days Before Plan Year Begins

Participants must be notified when plan sponsors decide to continue using or switch to a Safe Harbor plan design. PNC can help you meet this requirement. Participants must receive a notice no later than 30 days prior to the beginning of the plan year in which a Safe Harbor plan design will apply.

If you need to modify your Safe Harbor plan, we encourage consulting your legal counsel.

If you have questions, please contact your plan’s Account Manager.

Inside Vested Interest®

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The PNC Financial Services Group, Inc. (“PNC”) uses the marketing names PNC Retirement Solutions® and Vested Interest® for defined contribution plan services and investment options provided through its subsidiary, PNC Bank, National Association (“PNC Bank”), which is a Member FDIC. PNC Bank also provides custody, escrow, and directed trustee services; FDIC-insured banking products and services; and lending of funds. Insurance products may be provided through PNC Insurance Services, LLC, a licensed insurance agency affiliate of PNC, or through licensed insurance agencies that are not affiliated with PNC; in either case a licensed insurance affiliate may receive compensation if you choose to purchase insurance through these programs. A decision to purchase insurance will not affect the cost or availability of other products or services from PNC or its affiliates. PNC does not provide legal, tax, or accounting advice unless, with respect to tax advice, PNC Bank has entered into a written tax services agreement. PNC does not provide services in any jurisdiction in which it is not authorized to conduct business.

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