We offer many plan design options, custom-tailored to fit your company’s goals and objectives. There are popular features available such as “Cross-Tested” profit sharing contributions, “Roth” after-tax employee contributions, “Safe Harbor” 401(k), automatic enrollment, “hardship” distributions and participant loans.
401(k)
A traditional 401(k) plan allows employees to save for retirement by contributing a portion of their current pay to the plan on a “pre-tax” basis. They can save on federal and state taxes now, and potentially when they withdraw money upon retirement.
A 401(k) plan can allow for “Roth” contributions, where employees pay taxes
on their contributions now, but never on investment earnings (subject to
restrictions).
Employees typically voluntarily elect to make 401(k) contributions, but a plan can be
designed to automatically enroll employees who would otherwise not save for
retirement on their own (though they always have the option of electing out).
A 401(k) plan can also allow for employer-funded discretionary matching or profit sharing contributions, which may be subjected to a “vesting” schedule based on employees’ years of service.
“Safe Harbor” 401(k)
This type of 401(k) plan includes a fully-vested employer contribution (either 3% of pay for all eligible employees, or a dollar-for-dollar matching contribution on employees’ salary deferrals up to 4% of pay). This “buys” the plan out of certain IRS non-discrimination rules (ADP, ACP and Top Heavy) that may limit certain employees’ contributions, or require an employer-funded contribution.
“Cross-Tested” 401(k) and Profit Sharing
This is an effective design for many smaller, profitable companies,
when
the owners are older than the employees. "Cross-testing" is an advanced nondiscrimination
testing method that often allows a significantly higher rate of the employer-funded
contribution to be allocated to the owners than to the employees.
“Single-Participant” 401(k) and Profit Sharing
This type of plan is ideal for a company that doesn't have any employees who work 1,000 or more hours a year other than a 100%-owner, partners, or spouses of either. Not only is this a simple and cost-effective way to save much more for retirement than one could in a SEP or IRA – it offers additional advantages like the ability to take participant loans and enhanced protection from creditors and court orders.
Traditional Profit Sharing
This is the simplest type of traditional plan. Each year, the employer can decide to make a contribution to the employees of up to 25% of eligible pay. Employees who earn over the Social Security Taxable Wage Base ($113,700 for 2013) may receive higher allocation rates than others. Employees may be subjected to a “vesting” schedule.
Defined Benefit (traditional or “Cash Balance”)
Defined Benefit plans provide for a fixed (promised) benefit at retirement age, usually based on compensation and years of service. Annual employer contributions are determined by an actuary, using assumptions about future employee demographics and investment earnings. These plans can be appropriate when company owners have a shorter time to retirement, desire substantially higher contributions than 401(k)/profit sharing plans allow, or want to provide employees with the security of clearly-defined retirement benefits. The employer must be prepared to budget for recurring and fluctuating required contribution amounts.
Combination
In certain situations, a combination of 401(k)/Profit Sharing and Defined Benefit plans can be used to reap the benefits of Defined Benefit plans for targeted owners and key employees, while further maximizing their benefits through 401(k) and profit sharing contributions, and keeping the employer's contribution costs for rank-and-file employees lower than with a standalone Defined Benefit Plan.
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