Tony Novak profile picture
  "AskTony" column archive        


Categories

Most Popular

AskTony Archive

This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

Content is the opinion of the author and does not represent the position of any other person or entity. Information is from sources believed to be reliable but cannot be guaranteed.

The author is paid for product endorsements and has an ownership or other financial interest in the businesses related to the topics covered.

New questions

Submit consumer finance questions at OnlineAdviser.org and health insurance questions at OnlineNavigator.org

Sponsored by:

FreedomBenefits.net Insurance Exchange - your source of valuable information on state and federal health reform benefits.

Core Health Insurance - America's favorite mini-med insurance  with affordable premiums, freedom to choose providers, optional PPO discounts and guaranteed eligibility regardless of medical conditions.

Please support the Web sites that make publication of AskTony services possible.

Safe harbor 401(k) plan

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If in doubt, please send a new question or ask for an update.

Q: We are planning to implement the Safe Harbor provision in our 401(k) plan to avoid Highly Compensated Employee restrictions. I understand that this has to be put in place by December 1 of this year to apply to 2007. At the same time we are having merger discussions with another company who has an employer contribution 401K Plan. If we merge would our employees fall under their plan and the old plan with the Safe Harbor provision go away?

A: Employers have a wide degree of latitude in determining how to combine benefits plans in a merger. The DOL and tax laws are primarily designed to ensure that pension plans are not "raided" in mergers and that vested benefits are not unfairly denied to workers. Other than that, the 401(k) plan can probably be reformatted as the employer wants. As a practical matter, it is likely that the two plans will remain for some time after the merger since it takes some time (perhaps the rest of the plan year) for the plan administrator to complete a merger of the plans. The December 1 notification you refer to is simply designed to give employees a "head's up" about what the employer intends to do with regard to contributions in the plan next year. This gives employees time to react in a manner that, hopefully, allows them to adjust budgets and withholding gain the maximum benefit from the 401(k).

Summary

More resources:

resources