Small and midsized 401(k) sponsors may be the first to seek safe harbors from non-discrimination testing, if pension simplification measures survive the budget reconciliation process.
But many large employers and companies in certain industries simply won't be able to afford the much richer company contribution required to buy relief from burdensome administrative testing.
In exchange for making a minimum employer contribution to non-highly compensated employees (either an automatic 3% for all eligible employees or a 100% match on the first 3% of employee contributions and at least 50% match on the next 2%), plan sponsors will receive relief from ADP and ACP testing.
Consultants said the typical employer match now is 50% on the first 6% of employee contributions. To gain safe harbor, many employers would have to increase their match by about a third.