In a safe harbor plan, can provisions be provided only to NHCEs?

In a safe harbor plan, it is permissible for provisions to be specifically targeted towards non-highly compensated employees (NHCEs). This flexibility allows employers to create a plan that prioritizes the benefits for a certain class of employees, ensuring compliance with nondiscrimination requirements while potentially streamlining administrative processes. By focusing on NHCEs, plans can maintain the required benefits to satisfy safe harbor provisions without needing to extend those same benefits to highly compensated employees (HCEs).

This approach may have financial advantages for the company, as the focus on NHCEs can mean lower overall contributions required for compliance, making safe harbor plans an attractive option for employers looking to incentivize their lower-paid workforce.

Although the plan can target NHCEs, it is essential to recognize that any design must still meet the overall regulatory and compliance requirements laid out for 401(k) plans, especially regarding contribution limits and eligibility standards.