Retirement Plans


A Defined Contribution (DC) retirement plan, such as a 401(k) plan or 403(b), lets employees save for retirement by reducing their current salary on a before-tax basis. We take a holistic approach that helps put together your retirement program with services that help to reduce the amount of administrative work you have to do.

We determine, based on your client's needs, the best plan provide to cover record-keeping, investment services, fiduciary support, consulting services, compliance support, employee education and communication, benefit determination and payment and retiree payout services.

Pension & Profit Sharing

Typically, the employer contribute to a qualified profit-sharing plan. The contributions are discretionary--there's usually no set amount needed to contribute each year, and there is flexibility to contribute nothing at all, in a given year, if they so choose (although the contributions must be "substantial and recurring" for the plan to remain qualified).

The plan must contain a formula for determining how much the contributions are allocated among plan participants. A separate account is established for each participant that holds the contributions and any investment gains or losses.Generally, each employee with a year of service is eligible to participate (although you can require two years of service if contributions are immediately vested).

401(k) Plans

The 401(k) plan (technically, a qualified profit-sharing plan with a cash or deferred feature) has become a hugely popular retirement savings vehicle for small businesses. According to the Department of Labor, an estimated 60 million American workers are enrolled in 401(k) plans with total assets of about 3 trillion dollars. With a 401(k) plan, employees can make pre-tax and/or Roth contributions in 2011 of up to $16,500 of pay ($22,000 if age 50 or older). These deferrals go into a separate account for each employee and aren't taxed until distributed. Generally,each employee with a year of service must be allowed to contribute to the plan.

An employer can make contributions to a 401(k) plan--either matching contributions or discretionary profit-sharing contributions. Combined employer and employee contributions for any employee in 2011 can't exceed the lesser of $49,000 (plus catch-up contributions of up to $5,500 if your employee is age 50 or older) or 100% of the employee's compensation. In general, each employee with a year of service is eligible to receive employer contributions, but you can require two years of service if your contributions are immediately vested.

401(k) plans are required to perform somewhat complicated testing each year to make sure benefits aren't disproportionately weighted toward higher paid employees. However, you don't have to perform discrimination testing if you adopt a "Safe Harbor" 401(k) plan. With a Safe Harbor 401(k) plan, clients have to either match employees' contributions (100% of employee deferrals up to 3%of compensation, and 50% of deferrals between 3%-5% of compensation), or make a fixed contribution of 3% of compensation for all eligible employees, regardless of whether they contribute to the plan. Contributions must be fully vested.

SEPs

A SEP allows you to set up an IRA (a "SEP-IRA") for clients and each of their eligible employees. They contribute a uniform percentage of pay for each employee, although they don't have to make contributions every year, offering flexibility when business conditions vary. For 2011, contributions for each employee are limited to the lesser of 25% of pay or $49,000. Most employers, including those who are self-employed, can establish a SEP.

SEPs have low start-up and operating costs and can be established using an easy two-page form. The plan must cover any employee aged 21 or older who has worked for you for three of the last five years and who earns $550 or more.

For more information on any of these plans, please call us at (800) 979-9393.