Offering a retirement plan to employees can be a powerful tool for promoting financial confidence among your organization and its employees. As a small business owner, it's important the retirement option you offer meets the objectives of both your business and its employees. Let us help you design tailored strategies for your unique situation. We create customized plans for one person, small businesses and large businesses, and do so by working closely with plan sponsors to select the correct plan, administrator and investments to meets the owner's objectives.
Our plans can be as simple or complex as you’d like and can include both qualified and non-qualified products, depending on your preferences and objectives.
Our plans can be as simple or complex as you’d like and can include both qualified and non-qualified products, depending on your preferences and objectives.
Plan Options
|
|
SEP Plan
A SEP is a Simplified Employee Pension plan that allows small businesses to have a simple method of administering a retirement plan for their employees. Like a SIMPLE plan, SEP plans are based on IRAs and are typically known as SEP-IRA plans.
This has the same investment, distribution and rollover requirements as traditional IRAs; however, the contribution limits are much more generous. All contributions are from the employer.
Contributions are limited to the lesser of:
This has the same investment, distribution and rollover requirements as traditional IRAs; however, the contribution limits are much more generous. All contributions are from the employer.
Contributions are limited to the lesser of:
- 25% of compensation, or
- $53,000 for 2016 (the maximum any employee can contribute to all retirement plans combined).
SIMPLE Plan
SIMPLE stands for Savings Incentive Match Plan for Employees, which is an IRA plan offered by an employer. These plans are generally offered by smaller employers who do not offer more complex retirement plans.
The employee makes tax-deductible contributions to the plan, and an employer must make either matching contributions (up to 3 percent of the employee's salary) or non-elective contributions of 2 percent. The maximum contribution to a SIMPLE IRA is $12,500 for 2017. An employee age 50 or over can also make catch-up contributions of $3,000 for 2017.
If the employee participates in other retirement plans, total contributions - including those made to a SIMPLE IRA - are limited to $18,000 for 2016.
The employee makes tax-deductible contributions to the plan, and an employer must make either matching contributions (up to 3 percent of the employee's salary) or non-elective contributions of 2 percent. The maximum contribution to a SIMPLE IRA is $12,500 for 2017. An employee age 50 or over can also make catch-up contributions of $3,000 for 2017.
If the employee participates in other retirement plans, total contributions - including those made to a SIMPLE IRA - are limited to $18,000 for 2016.
401 (k) Plan, Possibly with a Safe Harbor Profit Sharing Plan
This most common employer-sponsored retirement plan today, this plan is primarily offered by large, for-profit businesses because it offers employers flexibility when designing the plan.
This type of plan is a defined contribution plan funded primarily by the employee but often comes with at least a partial employer match. The employee chooses from a list of investments in the 401(k) plan to put his or her funds into and then, upon reaching retirement, has complete control over the money in the account.
Annual contributions are limited to $18,000 for 2017. If the employee is age 50 or older, there is a catch-up provision allowing additional contributions of $6,000 for 2017.
The employees may contribute pre-tax earnings that will accumulate on a tax-deferred basis. Once the employee retires and begins taking distributions, those distributions will be taxable as ordinary income. In some plans, the employee may also choose to contribute after-tax earnings which accumulate tax-free in a Roth 401(k) account. These distributions from the plan are tax-free, as long as the employee is at least 59½ and has been in the plan for at least five years.
401(k) plan designs may also feature an employer profit sharing component. Various vesting schedules may be incorporated with any of the employer's contributions. If the safe harbor options are incorporated, simplified testing rules will be incorporated. Should the employee withdraw the funds prior to retirement, those funds can be rolled over into an IRA, Roth IRA or another employer’s 401(k) plan without incurring taxes or early withdrawal penalties.
Any funds withdrawn, but not rolled over into another qualified plan, may be subject to ordinary income taxes as well as a 10 percent early withdrawal penalty.
This type of plan is a defined contribution plan funded primarily by the employee but often comes with at least a partial employer match. The employee chooses from a list of investments in the 401(k) plan to put his or her funds into and then, upon reaching retirement, has complete control over the money in the account.
Annual contributions are limited to $18,000 for 2017. If the employee is age 50 or older, there is a catch-up provision allowing additional contributions of $6,000 for 2017.
The employees may contribute pre-tax earnings that will accumulate on a tax-deferred basis. Once the employee retires and begins taking distributions, those distributions will be taxable as ordinary income. In some plans, the employee may also choose to contribute after-tax earnings which accumulate tax-free in a Roth 401(k) account. These distributions from the plan are tax-free, as long as the employee is at least 59½ and has been in the plan for at least five years.
401(k) plan designs may also feature an employer profit sharing component. Various vesting schedules may be incorporated with any of the employer's contributions. If the safe harbor options are incorporated, simplified testing rules will be incorporated. Should the employee withdraw the funds prior to retirement, those funds can be rolled over into an IRA, Roth IRA or another employer’s 401(k) plan without incurring taxes or early withdrawal penalties.
Any funds withdrawn, but not rolled over into another qualified plan, may be subject to ordinary income taxes as well as a 10 percent early withdrawal penalty.
Cash Balance Plan
If the owner of the business is trying to push more of the overall contributions to a limited few, cash balance plans may be a better choice to incorporate.
Non-Qualified Plan
In some cases, there are a select few employees the owner wishes to reward or retain. An establishment of a "golden handcuff," or other employee package may make more sense in this situation.