What Is a Double Advantage Safe Harbor 401(k) (DASH 401(k))?

DASH 401(k) is 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) (DASH 401(k)) maximizes tax efficiency by stacking several tax code provisions.


Introduction To The 401(K)

There are three steps to creating a DASH 401(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 number of additional contributions that can be made without diluting the allocations to the business owner.

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

The DASH 401(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 DASH 401(k) plan combines an age-based plan with a Safe Harbor plan, the DASH 401(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 DASH 401(k) plan is not for all employers.