Qualified Plans for Your Company
Qualified plans provide essential retirement benefits for employers and employees and can also provide death and disability benefits. Qualified plans can give employers a critical edge in attracting and retaining highly qualified employees. Additionally, qualified plans provide tax advantages to employees, key executives, and business owners by utilizing pre-tax contributions rather than after-tax dollars. Qualified plans include:
- IRA plans
- 401(k) plans/Safe Harbor
- Defined contribution plans
- Defined benefit plans
Defined contribution plans
Defined contribution plans are tax-qualified retirement plans in which annual employer contributions, specified by the plan, are generally based on a percentage of employee compensation. The plan is permanent and established for the exclusive benefit of employees and their beneficiaries. The amount contributed by the employer on behalf of the employee is specified in the plan; not a benefit at retirement. For that reason, a participant’s actual benefit cannot be determined until retirement. Types of defined contribution plans:
Profit Sharing planspermit a degree of flexibility in annual employer contributions and include:
- Traditional profit sharing
- Profit sharing select (cross tested profit sharing)
- Age weighted profit sharing
- 403(b) plans
Pension plans require a fixed annual employer contribution and include:
- Money purchase plans
- Target benefit plans
Defined Contribution plans specify the contribution to be made for each participant. Generally, the benefit that will be available at retirement depends upon the accumulation of contributions and account performance within each participant’s account.
Business Planning Group is available to discuss setting up a qualified retirement plan for your organization. These plans allow employers a tax deduction for contributions the company makes to the plan and typically allows employees to defer payment of taxes on plan assets until the assets are distributed.
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