The IRS imposes strict guidelines on 401k plans to ensure that all employees, regardless of income, contribute equally to a plan.

Discrimination testing determines if a company's traditional 401k plan is too "top heavy." If employees earning more than $100,000 per year contribute over 2% more than lower-compensated employees, the higher paid employees must reduce their deferrals. The excess contributions would then be returned to the high paid employees and your company may face penalties.

There are two ways to avoid having top heavy 401k plans. The first is obvious: convince rank and file employees to contribute more through education and incentives. The second option is to convert traditional 401k plans into Safe Harbor 401k plans.

Safe Harbor 401k plans require you to match employee contributions as a percentage of salary – up to 4% of employee compensation – or provide a fixed contribution of 3%. You must make these contributions to all eligible employees 21 years or older with 1,000 hours of service in the previous year, even if they don't contribute on their own. All funds are 100% vested from day one. This matching will increase your expenses, but you won't be subject to discrimination testing and your employees are free to contribute any amount they wish up to the plan limits for the year.

You must continue to contribute to Safe Harbor 401k plans even if business experiences a downswing. If you must halt contributions, you're required to provide 30 days notice to your employees and will then be subjected to discrimination testing.

As more employees take full advantage of the plan, your chances of passing discrimination testing increase. Start by educating them about the benefits and necessities for planning for retirement. Providers can supply you with brochures, information packets, and even software detailing the importance of saving early and often. If you have employees in their 20s and 30s, explain how time works in their favor to by providing a nice head start to exponentially increase their retirement savings. If they are closer to retirement age, detail how the catch-up provision can compensate for those "lost investment years."