401(k) plans are Profit Sharing Plans with a cash or deferred option added to allow employees to defer additional income into the Plan.

These plans add cost sharing and tax savings concepts to a regular Profit Sharing Plan.

A Safe Harbor formula for the matching or profit sharing feature can eliminate the need for Actual Deferral Percentage (ADP) testing.

There are no limits on the number of employees required for these plans.

Employee Salary deferrals are allowed up to the legal limits.  (See limits page) Additionally catch-up provisions are allowed for participants who are 50 or older.

The plan can set an age 21 or one-year of service requirement.  A two year of service requirement may be set for matching or profit sharing features of the plan.  A one-year requirement is the maximum for the employee salary deferrals.

Matching and profit sharing is discretionary under a traditional 401(k) plan but mandatory under a Safe Harbor 401(k) Plan.

The plan may allow for loans, hardships and other types of distributions while in service based on regulations.

100% vesting is only required on Employee Salary Deferrals, Safe Harbor, Qualified Non-Elective and Qualified Matching Contributions.

Vesting schedules may be applied to other employer contributions to the plan.

The employer maximum contribution allowed is 25% of total aggregate eligible compensation for all plan participants.

For 2006 the maximum annual additions limit is $44,000 for those under age 50 and $49,000 for those over age 50 if catch-ups are allowed.