Double Advantage Safe Harbor 401(k) - DASH 401(k)

AAA

DEFINITION of 'Double Advantage Safe Harbor 401(k) - DASH 401(k)'

An employer-sponsored retirement plan, that combines the benefits of a 401(k) with a profit sharing plan. The Double Advantage Safe Harbor 401(k) (DASH401(k)), maximizes tax efficiency by stacking several tax code provisions.

There are three steps to creating a DASH401(k):

  1. First, the employer makes 3\% vested contributions to elect "safe harbor" plan status. This buys the plan an exemption from the ADP testing requirements and thus allows higher paid employees to maximize their elective deferrals.
  2. Because the ADP testing requirements have been removed, the second step is to maximize elective deferrals by the highly paid employees (i.e. employee contributions).
  3. Additional profit sharing employer contributions are then made. Calculations are made to determine the amount of additional contributions that can be made without diluting the allocations to the business owner.

INVESTOPEDIA EXPLAINS 'Double Advantage Safe Harbor 401(k) - DASH 401(k)'

The DASH401(k) retirement plan is commonly used by employers who want to maximize contributions to a select group, such as owners and executives. In exchange for mandatory vested employer contributions, administration fees are generally lower than with those with a standard 401(k) plan, and contribution limits are much higher.

Because the DASH401(k) plan combines an age-based plan with a Safe Harbor plan, the DASH401(k) is ideal for business owners and management that are older than their employees. It is also important to note that the employer is making a 3% contribution with immediate vesting commitment to all eligible employees. For this reason, the DASH401(k) plan is not for all employers.

VIDEO

Loading the player...
RELATED TERMS
  1. SBO-401(k)

    A tax-deferred, government-registered retirement savings plan ...
  2. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  3. Roth 401(k)

    An employer-sponsored investment savings account that is funded ...
  4. Supplemental Executive Retirement ...

    A non-qualified retirement plan for key company employees, such ...
  5. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  6. Employee Contribution Plan

    A company-sponsored retirement plan where employees may elect ...
RELATED FAQS
  1. We are in a 401(k) at work. Can we also do a Roth each year? If we can, can it also ...

    Participation in a 401(k) or any other employer plan does not affect your ability to establish and/or fund (or participate ... Read Full Answer >>
  2. I overcontributed to my 401(k). What are my options?

    If you overcontributed (made excess deferral contributions) to your 401(k) plan account, you should notify your employer ... Read Full Answer >>
  3. How do gains from my 401(k) figure into my taxable income?

    Capital gains from a 401(k) account figure into taxable income in that capital gains are taxed at the ordinary income rate ... Read Full Answer >>
  4. Does my employer's matching contribution count towards the maximum I can contribute ...

    Contributions to 401(k) plans come from employee salary deferral and employer match dollars. According to the IRS, employees ... Read Full Answer >>
  5. How much will an employer generally contribute to a 401(a) plan?

    The amount an employer contributes to an employee's 401(a) retirement savings plan can vary from plan to plan. 401(a) plans ... Read Full Answer >>
  6. When can benefits be received from a provident fund?

    Like most retirement savings vehicles, participants in provident funds are eligible to receive benefits at retirement. However, ... Read Full Answer >>
Related Articles
  1. Savings

    The Danger Of A 401(k) Flameout

    It looks like the 401(k) has failed, but what are the repercussions, and how can you protect yourself?
  2. Taxes

    Tips For Moving Retirement Plan Assets

    Moving assets is common when changing jobs or retiring, but you have to do this carefully to avoid penalties.
  3. Retirement

    Introduction To SIMPLE 401(k) Plans

    Learn about the features and benefits of the plan that is a cross between a SIMPLE IRA and a traditional 401(k) plan.
  4. Entrepreneurship

    401(k) Plans For The Small Business Owner

    If you own a business, this may be the plan for you! Find out about its benefits and eligibility requirements.
  5. Taxes

    Learn about eligibility requirements, contributions and distribution rules for these retirement plans.
  6. Professionals

    What Does an Ideal Retirement Portfolio Look Like?

    The "ideal" portfolio can differ from one investor to another depending on many factors, but some themes hold true no matter what.
  7. Investing

    How to Protect Your Retirement After a Divorce

    Divorce is never fun, but knowing the rules and anticipating the impact of retirement plan division and pension payouts can make things easier.
  8. Retirement

    Calculating Volume Weighted Average Price

    Volume weighted average price, or VWAP, is the average value of a stock traded over the course of a set time horizon, which is typically one day.
  9. Professionals

    Which Robo-Advisor is Right for You?

    Which robo-advisor is right for you? There are many factors to consider, including breadth of services, ease of use and cost.
  10. Retirement

    401(k) Rollovers: The Tax Implications

    The tax rules for 401(k) rollovers can be simple or more complex, depending on which path you take.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!