A qualified retirement plan must meet certain requirements based
on the Code set forth by the Internal Revenue Service. These requirements
set minimum and maximum participant levels, speed of vesting on
employer contributions and disparity of contribution levels. In
return for meeting these requirements, employers are allowed many
tax advantages to encourage businesses to establish and maintain
a qualified retirement plan.
Advantages for employer
· Employer contributions and in general the expense to maintain
the plan are tax deductible.
· Retirement plans attract and help retain key employees,
helping your company to stay competitive in tight labor markets.
· Employer contributions can be used to motivate employees.
· Allow employers to help their employees plan for retirement.
Advantage for employees
· The earnings on participants’ investments accumulate
tax-free and are not taxable until the funds are distributed to
· Employees are able to make pre-tax contributions into certain
types of defined contribution plans. This allows employees to defer
federal and in most cases state income taxes, through the automatic
· Receive immediate investment return when a company match
Selecting a Plan – There are different types
of plans from which to choose. Your decision will be based upon
your company and personal goals. The following plans are types of
defined contribution plans. Pension Performance, Inc. can discuss
your needs in detail and help you decide what type of plan is right
Defined Contribution Plan – Type of Qualified
Retirement Plan where the contributions vary year by year. There
is not a specific amount of benefits at retirement. The employee
or employer (or both) contribute to the employee’s individual
account under the plan annually. These contributions are generally
invested by the employee. The employee will ultimately receive the
balance of their account, which is based on contributions and investment
gains or losses.
- Profit Sharing Plan
- Salary Proportionate
- Integrated with social security
- Age-Weighted Profit Sharing Plan
- Class Allocation Profit Sharing Plan
- Traditional 401(k) Plan
- Safe Harbor 401(k) Plan
- Money Purchase Plan
- Simple Plan
To determine what is right for your plan or for additional information,
you may contact us at 815-733-6226.