Which of the following applies to safe harbor plans during the five-year rule?

In the context of safe harbor plans and the five-year rule, the correct answer is that these plans are treated as using the current year method for testing.

Safe harbor plans are designed to ensure that a retirement plan meets certain minimum contribution and eligibility requirements, thus providing automatic compliance with certain nondiscrimination tests. When it comes to the five-year rule, which generally pertains to the vesting schedule for contributions made to the plan, safe harbor plans rely on the current year method for testing eligibility and contributions.

This means that contributions made during the current year are the ones that are considered for meeting the safe harbor requirements, rather than looking back at contributions from previous years. This approach simplifies compliance and ensures that both employers and employees have an understanding of the status of their contributions and vested benefits in real-time, rather than using historical data.

The alternative options do not align with how safe harbor plans interact with the five-year rule. The prior year method, different sets of requirements, and exemptions from testing altogether do not accurately represent the operational framework that governs safe harbor plans under the current regulatory guidance regarding the five-year rule.