Yes, We Are In The Dog Days Of Summer, But It’s Time To Think About The October 1st Safe Harbor Deadline!
July 29, 2022 | posted in: Accountants | by Frye Retirement
Make Sure Your Clients Don’t Miss Out On Significant Tax Savings!
Act now to establish the plan by the October 1st deadline!
While we’re deep in the summer heat, Fall is just around the corner, and so are the Safe Harbor Plan deadlines. Safe Harbor 401(k) plans are the most popular type of 401(k) used by small businesses today because they offer small business owners many advantages.
If they’re still on the fence about starting a safe harbor 401(k) plan, share these benefits with your clients:
- They eliminate the hassle of IRS non-discrimination testing: They generally automatically pass annual ADP/ACP and top heavy tests, allowing business owners and other highly-paid employees to fund the maximum salary deferrals ($20,500 for 2022, or $27,000 if age 50 or older) without the risk of contribution refunds. To achieve safe harbor status, a 401(k) plan must make certain safe harbor contributions.
- Makes Retirement Saving Easy: Workers are 15 times more likely to save for retirement when they can do so automatically by payroll deduction¹. By starting a 401(k) plan, your clients will make saving for retirement as easy as possible for themselves AND their employees.
- Reduce Their Taxes: By starting a plan, your clients can reduce their tax bill! They can deduct, subject to IRS limits, employer contributions made to a 401(k) plan. And their business may also be eligible for up to $5,500 in tax credits by starting a plan.
- Attract and Retain Top Talent: A 401(k) plan is often a must-have employer benefit for top workers. By starting a plan, they’ll make it easier for their business to attract and retain the key employees it needs to succeed. And now more than ever, this is a key point for small business owners to keep in mind.
- Other things to consider: Safe Harbor plans can allow additional tax deductible discretionary profit sharing contributions, and offer Roth investing option for tax-free growth, which is not subject to income limits like other plans may be.
The Deadline Is Fast Approaching
If you have clients who are considering a safe harbor 401(k) plan for 2022, they need to decide soon – time is running out! The deadline for establishing a new safe harbor plan for the 2022 calendar year is October 1, but there are key deadlines to meet before then. Therefore, your clients need to act now if they want to take advantage of this benefit.
- September 1, 2022: 30-day notice must be sent to employees
- October 1, 2022: safe harbor 401(k) plan is effective and exempt from most nondiscrimination testing for 2022.
Don’t delay! Contact Frye Retirement Planning now to learn how we can help maximize your clients’ tax savings before the October 1st deadline.
