Choosing a retirement plan at your organization has many benefits to help your company. Boosting employee morale and retention are just a few of the benefits. In today's day and age many plans are available and easier than ever to administer with fees required to be disclosed as of July 1st 2012, which will make it easier than ever to choose a plan that fits your companies needs and goals.
- Attract and retain a higher level of skilled employee to your organization.
- Assist your employees with a plan for their retirement.
- Take control of your financial future.
- 401K plans help your employees and their families.
- Defer federal and, in most cases,state income taxes. Contributions can be made through automatic payroll deductions.
- Simplify investment decisions through an advisor, or their network.
- Receive immediate investment return when a company match is available.
CHOOSING A PLAN
There are many types of retirement plans available to choose from depending on what your goals are for your organization and employees. Reading through the questions below will help you determine what might be the best type of retirement plan to start with for your organization.
- If you have less than 100 employees, and would like to make company contributions less than 3 % of pay. One type of plan that would fit is a SIMPLE Plan.
- If you have employees that work less than 1000 hours a year, A S.E.P. Plan would be important to consider.
- Do you want contributions to vary with the corporate profits and be paid to employees immediately? A Cash Profit Sharing Plan would be a good consideration.
- Do you want contributions to vary according to company profits and be payable upon retirement? Consider a Deferred Profit Sharing Plan.
- Do you want to make contributions with the goal of participants achieving a specific "target"goal amount of money at retirement independent of company profits? Consider a target benefit type of plan or a Defined Benefits Plan.
- Do you want your employees to be able to defer some of their current income so they can save in a tax deferred account? Consider a 401K Plan.
- Do you want to match your employees contributions more than 3%? Consider a 401K Plan.
- Do you want to make contributions independent of company profits? Consider a money purchase plan.
PROFIT SHARING PLAN
A plan established and maintained by an employer to provide for the participation in its profits by its employees or their benificiaries. Company contributions may be determined either by fixed formula or at the discretion of the board of directors.
CASH PROFIT SHARING PLANS
Profit sharing plan in which profits are paid to employees directly in cash, check or stock as soon as profits are determined. (This type of profit sharing plan is not a qualified retirement plan).
DEFERRED PROFIT SHARING PLAN
Profit sharing plan designed to provide benefits upon retirement. Benefits at retirement are based strictly upon the sum total of contributions made and investment results returned therein.The plan must provide a definite predetermined formula for allocating contributions made to the plan participants.
401(K) Plan
A defined contribution plan that enables employees to choose between receiving current compensation and making pre-tax contributions to an account through a salary reduction agreement . Employers may also make contributions to employees accounts.
MONEY PURCHASE PLAN
A type of defined contribution plan in which the employers contributions are determined by a specific formula, usually as a percentage of pay. Contributions are not dependent on company profits.
TARGET BENEFIT PLAN
Contributions are based on an actuarial valuation designed to provide a target benefit to each participant upon retirement. The plan does not guarantee that such a benefit will be paid; it's only obligation is to pay whatever benefit can be provided by the amount in the participants account. It is a hybrid of a money purchase plan and a defined benefit plan.
SIMPLIFIED EMPLOYEE PENSION PLAN (S.E.P.)
This is essentially an individual retirement account (I.R.A.) to which an employee and his or her employer may contribute. Any employer contributions are excluded from an employees income.
SIMPLE PLAN (Savings Incentive Match Plan for Employees)
A type of pension plan that may be implemented by employers with 100 or fewer employees in which the employer matches 100% of employee deferrals up to 3% of compensation or provides non-elective contributions up to 2% of compensation. These contributions are immediately and 100% vested, and they are the only employer contribution to the plan. SIMPLE Plans may be structured as individual retirement accounts (I.R.A.)s or as 401(K) plans.
DEFINED BENEFITS PLAN
A type of retirement plan that provides each participant with a fixed income at retirement.
