Choosing The Right Plan
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Plan Design is crucial. Three key components must simultaneously be achieved:

  1. Significant corporate tax deduction
  2. Efficient allocation between business owners/partners and staff
  3. Meets overall budgets/cash flow

Which Retirement Plan is Right For You?

  • 401(k) Plan
  • Safe Harbor 401(k) Plan
  • Profit Sharing Plan
  • Defined Benefit Pension Plan
  • Cash Balance Pension Plan
  • Simplified Employee Pension (SEP)

Want to make sure you pick the right retirement plan for you and your employees?

As your premier third party administrator, we put together a list outlining the benefits and limitations of each type of plan. Take a look!

For more information, contact PlanPerfect for a quote and analysis to help determine which plan is right for your business.

401(k) Plan

  • Flexible Plan Design
  • 401(k) contributions reduce employee’s taxable income
  • Pre-tax deferrals up to 100% of compensation or $19,000*
  • Participants age 50 or older can defer an additional $6,000*
  • 401k deferrals are ALWAYS 100% vested
  • Participants may “self-direct” investments
  • Payroll-deduction makes it easy to save
  • Loans may be available
  • Rollovers from prior plans available
  • Plan Assets are protected from creditors
  • No required employer contribution

Safe Harbor 401(k) Plan

 

  • Deemed to pass discrimination testing and automatically meet top-heavy contribution requirements
  • Plan assets are protected from creditors
  • Employer contribution required
  • Safe Harbor contribution to eliminate ratio/compliance testing
  • Allows maximum 401k deferrals for highly compensated and key employees

Profit Sharing Plans

  • Best suited for companies that want maximum flexibility
  • Employer contributions are discretionary
  • May combine with a 401(k) plan
  • Vesting schedule available
  • Loans allowed
  • Rollovers from other retirement plans available
  • SEP-IRA may be rolled in
  • Participants may “self-direct” investments
  • Plan assets are protected from creditors

Limitations

  • Annual IRS Form 5500SF Tax Return
  • Moderate administration and fees
  • Salary deferrals not allowed
  • Anti-discrimination tests apply

Defined Benefit Pension Plan

  • Deductible contribution levels are substantially higher than the Plans listed above
  • Favors older, highly compensated employees
  • Vesting schedule
  • Trustee’s responsible for investment selection
  • Plan assets are protected from creditors

Limitations

  • Recurring annual contribution
  • Annual IRS Form 5500SF Tax Return
  • Extensive administrative detail
  • Actuarial certification required
  • Not good for younger owners / older employees

Cash Balance Pension Plan

  • Significant corporate tax deduction
  • Some flexibility in Plan Design
  • Favors older and long tenured employees
  • Compress high contributions into a short time frame
  • Plan assets are protected from creditors

Limitations

  • Recurring annual contribution
  • Annual IRS Form 5500SF Tax Return
  • Extensive administrative detail
  • Actuarial certification required
  • Not good for younger owners / older employees

Simplified Employee Pension (SEP)

  • Simple to establish and maintain
  • Contributions deductible to the employer
  • Maximum deductible contribution 25% of wages
  • Flexible contribution amounts
  • No annual IRS Form 5500 Tax Return
  • Less administrative detail
  • Plan assets are protected from creditors

Limitations

  • Employer contribution only
  • Vesting – 100% full and immediate
  • No federal protection from creditors
  • Must include part-time employees
  • No Loans

PlanPerfect: The perfect fit for your retirement plan

Choosing the right plan for your business is important to ensure the plan’s success. Explore our services and contact us today for a free consultation!