Qualified Plans (Plan Sponsor required to file Form 5500)

Defined Contribution Plans

401(k) Traditional or Basic- The traditional 401(k) plan is set up to allow employers and employees to defer a certain amount of compensation from each payroll period. This deferral is posted to an individual's own personal retirement account tax free with the idea that, over time, the amount will accumulate to a decent nest egg for the individual. Upon retirement age the individual can then feel secure in knowing that they have a benefit to receive. Traditional 401(k) plans are subject to annual nondiscrimination testing that is required by the Internal Revenue Service.

401(k) Safe Harbor- The 401(k) Safe Harbor option allows the highly compensated employees and owners to maximize their 401(k) deferrals within the current IRS limits without worrying about whether or not they will pass nondiscrimination testing. Through the enactment of a “Safe Harbor” the employer can contribute the following; 3% or more of the employee’s wages or a 100% match of deferrals up to 4% of compensation to each individual participant’s retirement account.

401(k) Auto Enroll- Get your employees started on their path to retirement by automatically enrolling them in the 401(k) plan. Use the “path of least resistance” to encourage participation in your plan by automatically enrolling participants as they become eligible. You can also impose automatic increases in deferrals and be sure that employees are taking advantage of your company’s retirement plan.

Profit Sharing Plan- Your Company has been successful through the hard work of both you and your employees. Now take that success and help secure your future through a Profit Sharing plan. At Crest Retirement we will calculate your profit sharing contribution based on age and service to maximize your benefit while also benefitting those who helped you achieve that success. This type of plan requires less maintenance than a 401(k) since you only have to make deposits once a year.

403(b)- 403(b) plans are similar to 401(k) plans, however, these types of plans can only be offered by a non-profit or government organization.

Money Purchases- Money Purchase plans are virtually obsolete. A Money Purchase plan is like a Profit Sharing plan, except that it has a required contribution amount, typically as a percentage of wages. Recent regulations allow for Profit Sharing plans to contribute up to 25% of wages. Previously, Profit Sharing plans could only contribute up to 15%. Money Purchase plans have always been permitted to contribute 25% of wages.

Defined Benefit Plans

Cash Balance- A Cash Balance plan is a hybrid between a profit sharing plan/defined contribution and a defined benefit plan. Although it is technically considered a defined benefit plan, it has a hypothetical balance that emulates a profit sharing/defined contribution plan.

Cash Balance/401(k) Combo- Combining a Cash Balance Plan with a Safe Harbor 401(k) plan can be an effective tool for an older small business owner trying to maximize his or her contributions.

Traditional Defined Benefit Plans- These plans have a monthly benefit at retirement and require an actuary to determine the annual required funding amounts.

IRA BASED PLANS (No form filing requirements by plan sponsor)

SEP- Simplified Employee Retirement plans allow employers to contribute directly to an employee’s traditional individual retirement account. This contribution can be up to 25% of the employee’s compensation, but the rate must be uniform to all employees. Also, unlike a Qualified Plan, the participant can withdraw his or her funds at any time.

SIMPLE- The acronym SIMPLE stands for Savings Incentive Match Plans for Employees. Congress is proud of their acronyms. This is another type of plan that sets up an Individual Retirement Account for the employee. This type of plan requires an employer contribution of 2% of wages for all employees, or a 3% match, and has lower contribution limits for the employee deferrals than the traditional 401(k) plan. No additional employer contributions are permitted. Also, unlike a Qualified Plan, the participant can withdraw his or her funds at any time.

SARSEP- This acronym stands for Salary Reduction Simplified Employee Pension Plan. These plans are no longer available and have been replaced by SIMPLE plans.

Designing a retirement plan for your company will not only better prepare you for the future, but also create a business that is attractive and competitive within the current employee marketplace.

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