The basic safe harbor match formula is 100% on the first 3% of deferred compensation and 50% on the next 2% for a max of 4% if you defer 5% or more.


Sample Safe Harbor Match Illustration (Basic Match)

Wages

Deferrals

Deferral Percentage

SHM Percentage

SHM Amount

$50,000

$0

0%

0%

$0

$50,000

$1,000 

2%

2%

$1,000

$50,000

$1,500

3%

3%

$1,500

$50,000

$2,000 

4%

3.5%

$1,750

$50,000

$3,000 

6%

4%

$2,000


An enhanced safe harbor match is no less than the basic match at any tier level. The most common enhanced safe harbor match formula is a 100% match on the first 4% of deferred compensation. The maximum match for the enhanced formula would be 100% on the first 6% of deferred compensation.


Sample Safe Harbor Match Illustration (Enhanced Match)

Wages

Deferrals

Deferral Percentage

SHM Percentage

SHM Amount

$50,000

$0

0%

0%

$0

$50,000

$1,000 

2%

2%

$1,000

$50,000

$1,500

3%

3%

$1,500

$50,000

$2,000 

4%

4%

$2,000

$50,000

$3,000 

6%

4%

$2,000


A plan with a safe harbor match and no additional employer contributions will pass ADP, ACP and top heavy tests.


There are other safe harbor match formulas, such as the matching contribution for a QACA (qualified automatic enrollment arrangement) which is 100% of an employee's contribution up to 1% of compensation and a 50% matching contribution for the employee's contributions above 1% of compensation and up to 6% of compensation. 


While a safe harbor match generally has 100% immediate vesting, a QACA matching contribution must be 100% vested by two years of service.


(FAQ09RP)