Retirement Plans for Small Businesses

Safe Harbor 401(k) Plans May Help Owners and Employees Save More

With standard 401(k) plans, the amount that a company’s owners or highly compensated employees can contribute is often restricted by how much other employees contribute to the plan, making such plans a less effective savings vehicle for many small businesses. However, with the more flexible safe harbor option, owners may be able to make larger contributions for themselves (as employee and employer) in exchange for making tax-deductible contributions or “matches” for employees.

In addition, the annual IRS non-dis-crimination testing that normally applies to standard 401(k) plans is eliminated from safe harbor plans, which typically makes them easier and less expensive for small businesses to maintain.

To help shelter more of your income from taxes, and possibly help your employees do the same, compare the benefits and limitations of safe harbor 401(k) plans to other retirement plans to determine which one could best meet your company’s needs.

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2012 Emerald.

Douglas R. Peete is licensed in AZ, CA, CO, FL, GA, ID, IN, KS, KY, MI, MO, MS, NC, NE, NJ, NM, NV, NY, PA, SC, TN, TX, and WI to offer insurance products, and life insurance (including variable life), annuities (including variable annuities), and is securities registered in AR. AZ, CA, CO, FL, GA, IA, IL, IN, KS, KY, MA, MD, MI, MN, MO, NC, NE, NH, NJ, NV, NY, OH, OK, PA, RI, SC, TX, UT, VA, WA, and WI and adviser registered in KS. Jonathan Potter is licensed in KS to offer insurance products, and life insurance (including variable life), annuities (including variable annuities), and is securities registered in KS and MO. Nikki Carpenter and Terry Gaumer are securities registered in KS and MO.

IMPORTANT CONSUMER INFORMATION: Douglas R. Peete, Jonathan Potter, Nikki Carpenter, and Terry Gaumer may only transact business in a particular state after licensure or satisfying qualifications requirements of that state, or only if he or she is excluded or exempted from the state's registration requirements. Follow-up, individualized responses to consumers in a particular state by Douglas, Jonathan, Nikki or Terry that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, shall not be made without first complying with the state's requirements, or pursuant to an applicable state exemption or exclusion. For information concerning the licensure status or disciplinary history of a broker-dealer, investment adviser, BD agent or IA representative or any financial institution he or she represents, contact your state securities law administrator.

Insurance products from the Principal Financial Group® are issued by Principal National Life Insurance Company (except in New York), Principal Life Insurance Company and the companies available through the Preferred Product Network, Inc. Securities and advisory products offered through Princor Financial Services Corporation, 800/247-1737, member SIPC. Principal National, Principal Life, the Preferred Product Network, and Princor® are members of the Principal Financial Group®, Des Moines, IA 50392. Douglas R. Peete, Principal National and Principal Life Financial Representative, Princor Registered Representative, Financial Advisor. Jonathan Potter, Principal National and Principal Life Financial Representative, Princor Registered Representative. Nikki Carpenter and Terry Gaumer, Princor Registered Representatives. Douglas R. Peete & Associates is not an affiliate of any company of the Principal Financial Group®.

Group Benefit Plans and Administrative Services from Douglas R. Peete & Associates are not provided by any company of the Principal Financial Group®.

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