More and more employees view 401(k) plans as a valuable benefit which has made them the most popular type of retirement plan today. Employees can benefit from a 401(k) plan even if the employer makes no contribution. Employees can voluntarily elect to make pre-tax contributions through payroll deductions up to an annual maximum limit
Since a 401(k) plan is a type of profit sharing plan, profit sharing contributions may be made in addition to, or instead of, matching contributions.
401(k) Safe Harbor Plans
These are designed to satisfy nondiscrimination testing. Safe Harbor requirements include certain minimum employer contributions and 100% vesting of employer contributions. The benefit of eliminating the testing is that Highly Compensated Employees can defer up to the annual limit without concern for how much the Non-Highly Compensated Employees defer.
New Compatibility Plans (Cross-Tested)
New comparability plans, sometimes referred to as ```cross-tested plans``, are usually profit sharing plans that are tested for nondiscrimination as though they were defined benefit plans. By doing so, certain employees may receive much higher allocations than would be permitted by standard nondiscrimination testing. New comparability plans are generally utilized by small businesses that want to maximize contributions for owners and higher paid employees, while minimizing contributions for all other eligible employees.