Qualified Retirement Plans
Money Purchase Plans
A money purchase plan is a pension plan that has a mandatory annual contribution. The contribution formula is established in the plan document however company contributions can be as high as 25% of pay. Employers also have the option of making all contributions subject to a vesting schedule.
Profit Sharing Plans
For businesses with a number of part-time employees or high employee turnover, or those needing the freedom of variable contributions, a Profit-sharing plan may be the perfect answer.
- Discretionary contributions of up to 25% of compensation (20% of net profits for a self-employed person)
- The potential to exclude part-time and seasonal workers, depending on the eligibility requirements you select
- Choice of vesting schedules may be available
- Loans and hardship withdrawals may be available
- The option of Social Security integration
401(k) Plans
A 401(k) plan allows participants to contribute a portion of their pre-tax salary to a tax-deferred retirement plan. Some companies may provide a matching option to their employees as an extra incentive for the participants to contribute. All plans are subject to discrimination testing to ensure all plan participants are receiving equal benefit.
- Salary deferral contributions as well as employer contributions
- $16,500 salary deferral limit
- “Catch-up” contribution of $5,500 for those ages 50 and older
- Contributions may be split between Traditional 401(k) plans and Roth 401(k) plans. Employer contributions are treated as Traditional 401(k) contributions
- Safe Harbor option for small businesses to ensure plan passes all discrimination testing
Roth 401(k)s
Similar to a basic Roth-IRA, Roth 401(k) contributions are made with after-tax dollars and are eligible to grow tax free. Unlike a Roth-IRA, participants may contribute regardless of how much they earn. A Roth 401(k) must be combined with a Individual (k) or a 401(k) plan and cannot be established on its own.
- Salary deferral contributions only
- $16,500 contribution limit
- “Catch-up” contribution of $5,500 for those ages 50 and older
- Contributions may be split between Traditional 401(k) plans and Roth 401(k) plans. Employer contributions are treated as Traditional 401(k) contributions
403(b) Plans
A 403(b) plan is a tax-favored retirement plan for employees of school systems, nonprofit organizations, or other tax-exempt employers (know as 501(c)(3) organizations). Participants can make pre-tax contributions and some organization even provide a matching incentive to their employees.
- Employee pre-tax contributions are immediately vested
- Employer matching contributions may be subject to a vesting schedule