There are three steps to creating a DASH401:
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.
Because the ADP testing requirements have been removed, the second step is to maximize elective deferrals by the highly paid employees .
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.
Watch: Introduction in 401
The DASH401 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 plan, and contribution limits are much higher.
Because the DASH401 plan combines an age-based plan with a Safe Harbor plan, the DASH401 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 plan is not for all employers.