Safe Harbor Act
HRH
83 Posts
A collegue has mentioned to me a Safe Harbor Act initiated in August by Homeland Security which requires more action on SS No-Match letters. Can anyone comment on this? Many thanks!
Comments
I know if you get no-match SS #letters and don't correct them there is a fine. It should say on the letter.
The short answer is Safe Harbor was put into place by the IRS as a means whereby companies can elect to automatically deposit a certain amount of money into employees' 401(k) accounts each year without having to go through a cumbersome testing process. This process is to ensure that the company is not "top heavy" in their 401(k) contributions which would unfairly benefit higher earning employees. The IRS allows employers to either go through the testing process or elect the Safe Harbor. There are about 4 different Safe harbor elections that a company can choose from. Companies have to declare the type of contribution it will make and notify employees before the beginning of the year.
A wealth of information can be found about Safe Harbor on line.
Relative to Social Security no-match letters, the safe harbor provisions provide the employer with relief from penalties if they act in good faith to rectify any mismatches. There are proscribed actions that the employer has to take to be able to invoke the safe harbor provisions.