When Are Safe Harbor Contributions Due?

Safe harbor contributions are a key element of many 401(k) retirement plans. These employer contributions help a 401(k) plan satisfy Internal Revenue Service (IRS) nondiscrimination tests, such as the Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) tests. These tests ensure benefits do not disproportionately favor highly compensated employees. By making these contributions, employers gain relief from the administrative burden of annual compliance tests, allowing highly compensated employees to contribute maximum amounts to their 401(k)s. Understanding these deadlines is important for maintaining plan compliance.

Standard Deadlines for Safe Harbor Contributions

Deadlines for safe harbor contributions depend on the type of contribution and how it is calculated and deposited. The two primary types are Safe Harbor Non-Elective (SHNE) contributions and Safe Harbor Matching (SHM) contributions. These employer-funded contributions are generally immediately vested, meaning employees have full ownership of the funds upon deposit.

Safe Harbor Non-Elective (SHNE) contributions involve an employer contributing at least 3% of each eligible employee’s compensation, regardless of employee deferrals. For these contributions, the general deposit deadline is the due date of the employer’s tax return for the plan year, including extensions. For a calendar year business, C-Corps and sole proprietorships generally have until April 15th, or October 15th with an extension, to deposit SHNE contributions for the prior plan year. S-Corps and partnerships typically face a March 15th deadline, or September 15th with an extension. While deposits can be made by December 31 of the following year for compliance, making the contribution by the tax filing deadline allows for a deduction in the prior tax year.

Safe Harbor Matching (SHM) contributions require the employer to match a portion of employee deferrals. Deposit timing for SHM contributions varies based on plan provisions. If the plan calculates the match per-payroll, contributions are generally deposited alongside employee elective deferrals. At minimum, per-payroll SHM contributions must be deposited quarterly, by the last day of the quarter following the quarter earned. For example, contributions for the quarter ending September 30 must be deposited by December 31. If SHM contributions are calculated annually or year-end, the deposit deadline aligns with SHNE contributions: by the employer’s tax filing deadline for the plan year. Employers must adhere to Department of Labor (DOL) rules for depositing participant contributions and loan repayments. Contributions must be deposited as soon as reasonably segregated from employer assets, but no later than the 15th business day of the month following withholding. For smaller plans (fewer than 100 participants), a safe harbor rule allows deposits within seven business days of the pay date to be timely.

First Year Contribution Deadlines

Establishing a new 401(k) plan with a safe harbor provision involves specific deadlines for the initial plan year. For a calendar year plan, it must be established and ready to process 401(k) elective deferral contributions by October 1st to be a safe harbor plan for that initial year. This October 1st deadline ensures the plan is in effect for at least three full months, allowing eligible employees to contribute for the required period.

To meet the October 1st deadline, employers should initiate setup well in advance, often by September 1st, to allow for administrative procedures and the required 30-day employee notice. This notice informs employees about their rights and obligations under the plan, including the safe harbor contribution formula. For new plans, safe harbor contributions (both SHNE and SHM) for this shortened first plan year are subject to standard deposit deadlines: by the employer’s tax filing deadline for that initial year. If a full annual contribution is required even for a partial first year, due dates for these initial contributions remain consistent with general deadlines for ongoing plans.

Impact of Plan Changes on Deadlines

Changes to a 401(k) plan’s safe harbor status can affect contribution obligations and due dates. Safe harbor contributions must generally be in effect for the entire plan year, but regulations permit mid-year changes under specific circumstances.

An employer may suspend or reduce safe harbor contributions mid-year if the company is operating at an economic loss, or if the annual safe harbor notice included a statement reserving this right. If a suspension occurs, a supplemental notice must be provided to employees at least 30 days before the change, explaining it and allowing participants to adjust deferral elections. The plan document must also be amended. Even if contributions are suspended, any safe harbor contributions accrued or promised prior to the change must be made by their respective deadlines.

Increasing contributions is generally permissible mid-year, but certain changes are prohibited unless required by law. For example, a plan cannot change from a safe harbor match to a non-elective contribution mid-year, nor reduce the number of eligible employees. If a plan’s safe harbor status is terminated or altered, it will generally become subject to nondiscrimination testing (ADP/ACP testing) for the entire plan year of the change. The employer must ensure compliance with these tests, which the safe harbor provision typically helps avoid.