Plan options

A Safe Harbor 401(k) does not restrict the ability of highly compensated employees to defer the maximum permitted by the plan and IRS. And since the Safe Harbor plan may be combined with profit sharing plans, it provides an excellent way for employers to make the most of employers retirement savings (subject to IRS plan and participant limits.)

• Highlights
  • Defer more income, regardless of employee participation levels.
  • Works with profit-sharing plan to contribute the maximum.
  • No compliance or discrimination testing.
  • Catch-up contributions available for participants over age 50.

A cash balance plan may be suitable for business owners that want to accelerate their retirement savings while offering potential tax benefits. Cash balance plans are often referred to as a “hybrid” retirement plan because it combines some of the features of a defined contribution plan, such as a 401(k) plan, and a defined benefit plan. While a traditional defined benefit plan provides for a specific benefit at retirement (typically a specified monthly payment amount), a cash balance plan provides the benefit at retirement in the form of an account balance.

• Highlights
  • Participants receive a set percentage of their yearly compensation plus interest charges.
  • Contribution limits increase with age. Therefore, older business owners seek out these types of plans to accelerate their retirement savings.

Traditional 401(k) plans with low start-up costs are a great tool for attracting and retaining employees, while enabling you to defer income taxes on contributions.

• Highlights
  • Pre-tax salary deferrals.
  • Discretionary employer matching.
  • Profit-sharing contributions.
  • Eligible rollovers from employee’s previous retirement plans.

One-person businesses, whether or not the owner also works full-time for another employer, should take a hard look at how they may be able to generate tax deductions for themselves — that are more than twice as much in some cases than with traditional retirement plans — by establishing an owners 401(k) plan. These plans can be inexpensive to set up and you have the flexibility to decide each year whether to contribute.

• Highlights
  • Designed for one-person business.
  • Meaningful contributions may be made toward spouse or other family members employed by business.
  • Optional yearly funding.
  • Low setup charges.
  • Catch-up provisions apply for participants age 50 and over.

Some years are financially better than others. Even in established practices, there are times when the money just isn't there to contribute to a retirement plan. Then there are other years where employers want to reward employees and contribute as much as they can – tax-deferred – for their retirement. Profit-sharing plans enable you to vary your retirement contributions year to year with no advance commitment.

• Highlights
  • No predetermined contribution formula.
  • Only the employer may contribute.
  • Vesting schedules may be adopted to reward long-term employees.
  • Employee contributions must be made by the employer if the employer wishes to contribute for themselves.

New comparability plans may enable employers to reduce retirement plan costs while maximizing contributions and are suitable for businesses that wish to enable key employees to save more for retirement – particularly those who have difficulty meeting nondiscrimination requirements of standard profit-sharing or 401(k) plans.

• Highlights
  • Categorize employees by several criteria, where each category may receive a different contribution percentage.
  • Contributions for older workers in age-weighted plans may be considerably higher than those for younger employees.