The Internal Revenue Service has issued its final safe harbor rules for employers facing business hardships.
The agency ruled that companies that operate at a loss can eliminate or reduce non-elective contributions made to Safe Harbor 401(k) plans midyear.
The Safe Harbor 401(k) has been popular among small business owners because it allows them and their highly-compensated employees to make the maximum contribution either tax-deferred or after tax to their Roth 401(k) regardless of income. In exchange for modest contributions to other plan participants on a matching basis, the plan doesn't have to go through strenuous nondiscrimination testing requirements that apply to standard 401(k) plans.
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