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Kiplinger
Kiplinger
Business
Kathryn Pomroy

What Is a Safe Harbor 401(k)?

IRS
Retired couple sitting in downtown Bar Harbor, Maine in summer during bright red sunset at twilight.

A Safe Harbor 401(k) is a retirement plan with one subtle difference from a standard 401(k): Businesses can bypass the IRS's annual nondiscrimination testing — a requirement for plans like 401(k)s to maintain their tax-qualified status.

These plans allow business owners and highly compensated employees (HCEs) to maximize their retirement contributions (up to the full annual limit, e.g., $23,500 in 2025 and $24,500 in 2026, plus catch-ups) without restrictions or refunds due to failing IRS nondiscrimination tests.

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