Safe Harbor Options
401(k) plans are intended to provide comparable advantages for all employees, and there are numerous safeguards in place to make sure their benefits are allocated equitably. U.S. regulatory measures ensure that a company’s plan does not disproportionately benefit some employees over others, regardless of their income or ownership status. To evaluate whether the plan is administered in an even-handed manner, the IRS conducts annual nondiscrimination tests. Failure of any of these tests can result in significant — and costly — additional contributions or required corrective distributions to some employees.
