A Safe Harbor 401(k) option, compared to other types of plans, offers business owners a greater percentage of contributions made to the plan. Take a look at the following hypothetical illustration of a Safe Harbor 401(k) option with four participants to see how the owner might benefit.

                                                                  Matching      Total Contribu-

                                                                     Salary    Contribution    tions (paid by

                                    Compensation    Deferral         (4%)          the employer)

Business                 $100,000        $15,500     $4,000            $19,500
owner

Employee A                30,000           1,200       1,200                1,200

Employee B                40,000           1,600       1,600                1,600

Employee C                50,000           2,000       2,000                2,000

Total Contributions                                                         $24,300

As you can see in this example, total contributions to the plan are $24,300 of which $19,500 belongs to the business owner.  Assuming a 4% matching contribution to satisfy Safe Harbor 401(k) requirements, the mandatory contribution to employees does not exceed $4,800.

Potential Safe Harbor candidates

A Safe Harbor 401(k) option typically appeals to owners of small businesses with less than 15 employees. Good candidates typically include law firms, medical practices, CPA firms, and architectural firms—all businesses with highly paid individuals. To determine whether a Safe Harbor 401(k) option might work, consider if the business owner:

·         Would like the opportunity to save in excess of $15,500 annually;

·         Has less than 15 employees; and

·         Is looking for low-cost ways to save on taxes.

Key facts about a Safe Harbor 401(k) option

§         Salary deferrals: All salary deferrals for the employer and employees are capped at the annual contribution limit: $15,500 in 2007.

§         Catch-up contributions: A catch-up contribution (deferral from pay) is available for anyone who will or has attained the age 50 or older in the calendar year. In 2007, the catch-up contribution is $5,000.

§         Mandatory employer Safe Harbor contributions: There are two types of mandatory employer Safe Harbor Contributions. When either is chosen, the Plan will automatically pass both ADP and ACP tests, as well as Top Heavy testing.

§         Additional employer contributions: The employer may wish to make additional employer contributions above and beyond the required Safe Harbor contributions. These contributions can be subject to a vesting schedule at no additional cost.

Note: Additional contributions in excess of safe harbor contributions may require the plan to satisfy IRS non-discrimination requirements.

§         Vesting: Mandatory employer matching or non-elective contributions, adjusted for earnings or losses, are 100% vested.

§         Notification: Employer must provide notice to employees in writing thirty days prior to plan start, and again prior to each year the plan remains a Safe Harbor Plan. This notice must disclose, among other Safe Harbor Plan features, the contributions that will be made under the plan.

§         Minimum three-month plan year for first year: To begin a plan for the current year, the plan must be established and employees notified before October 1^st of the current year.

§         Converting a traditional 401(k) to a Safe Harbor option: To change your existing 401(k) plan to a Safe Harbor Plan, the plan must be established and employees notified before January 1 of the next year.

For more detailed information, contact the Polaris401(k) Sales Desk at 877-814-401k or your Polaris Wholesaler at 888-502-2900.

A prospectus for the underlying investment options is available by calling 877-814-401k. The prospectus contains the investment objectives, risks, fees, charges, expenses and other information regarding the underlying investment options, which should be considered carefully before investing. Clients should read the prospectus carefully before investing. The unallocated group variable annuity funding Polaris401(k) is an unregistered product without a contract prospectus.

This material does not constitute an offer to sell. Participation in the Polaris401(k) plan is contingent upon the applicant satisfying minimum plan standards and qualifications. The group variable annuity funding Polaris401(k) is issued by AIG SunAmerica Life Assurance Company in Delaware. The product is not available in the state of New York. AIG SunAmerica Life is a subsidiary of AIG Retirement Services, Inc. and a member of the American International Group, Inc. (AIG) family of financial services companies. Investment involves financial risk, including possible loss of principal. Investment return and principal value will fluctuate. The contract and/or participant’s account value, when redeemed, may be worth more or less than the original investment. The provisions of the plan may differ from the contract. Should such differences occur, the plan provisions will take precedence. Form: AN-940 (9/99)
 

Distributed by AIG SunAmerica Capital Services, Inc., 21650 Oxnard Street Woodland Hills, CA 91367 1.800.445.7862.

Not FDIC or NCUA/NCUSIF Insured.    No Bank or Credit Union Guarantee.     May Lose Value.

Polaris^® and SunAmerica^® are registered trademarks of American International Group, Inc. © 2007 American International Group, Inc. All rights reserved.

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