EMPLOYER A comparison of qualified retirement Types of qualified retirement plans Profit Sharing...

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Transcript of EMPLOYER A comparison of qualified retirement Types of qualified retirement plans Profit Sharing...

  • A comparison of qualified retirement plans FOR EMPLOYER USE ONLY. NOT FOR USE WITH EMPLOYEES.

    E M P LOY E R

  • FOR EMPLOYER USE ONLY. NOT FOR USE WITH EMPLOYEES.

    Types of qualified retirement plans Profit Sharing Plans – and 401(k) Plans allow for a discretionary contribution by the employer. The 401(k), Safe Harbor 401(k) and SIMPLE 401(k) Plans include pre-tax employee salary deferrals.

    • Profit Sharing Plan* • 401(k) Plan* • SIMPLE 401(k)* • Safe Harbor 401(k)*

    Pension Plans – They offer a fixed commitment to provide a benefit or to make a contribution for the participant based on a stated formula in the plan:

    • Cash Balance Plan • Defined Benefit Plan • Target Benefit Plan* • Money Purchase Plan*

    Defined Contribution Plans – They are listed above with an asterisk (*), and have participant accounts which are subject to the earnings of the investments held by the plan. The retirement benefit is based on the accumulation of dollars in the participant’s account.

    Defined Benefit Plans – They provide for a stated monthly retirement benefit which is funded by the employer. The plan costs are based on the assumptions set by the Enrolled Actuary. These plans are also covered by the Pension Benefit Guaranty Corporation (PBGC) (unless exempt). Fully Insured Defined Benefit Plans (412(i) plans)  do not need an Enrolled Actuary.

    Section 403(b) Plans – A deferred compensation program (also referred to as a tax sheltered annuity) which is a special type of retirement plan for public education organizations and certain tax-exempt organizations. The term “qualified plan” does not include a section 403(b) plan.

    Section 457(b) Plan – a “nonqualified” deferred compensation Plan that is maintained by an eligible employer – which may be a State, a political subdivision of a State, an agency or instrumentality of a State or political subdivision of a state, or a tax-exempt organization. A section 457(b) plan is one of two types of section 457 plans, with the other type often referred to as an “ineligible” nonqualified plan under Internal Revenue Code section 457(f).

    Other types of retirement plans Simplified Employee Plans – SEPs – This plan works like a profit sharing plan. The employer’s contribution is discretionary. Contributions go directly to a traditional retirement account or a traditional retirement annuity (SEP-IRA) of each eligible employee.

    Salary Reduction Simplified Employee Pensions – Grandfathered SARSEPs – A SARSEP is a SEP set up before 1997 which allows eligible employees to make pre-tax salary deferrals into their IRA. No new SARSEPs may be established after 12/31/96.

    SIMPLE IRAs – Allow employees to make pre-tax salary deferrals into a SIMPLE IRA account with an employer match or non-elective contribution.

  • SEP/SARSEP (1) SIMPLE IRA (2) SIMPLE 401(k) (3) Profit Sharing (4) 401(k) (5) Safe Harbor 401(k) (6) QACA5 (7) Money purchase (8) Defined Benefit (9) 403(b) (10) GOVERNMENTAL 457(b) (11) Deadline for establishing the Plan No later than due date (including

    extensions) for filing employer’s tax return. (No new SARSEPs after 12/31/96.)

    Generally, no later than Oct. 1 of a calendar year.1 Employer with 100 or fewer employees that does not maintain another qualified plan.

    Same as (2) No later than plan year-end Same as (4) In general, a Safe Harbor 401(k) plan must be adopted before the beginning of the plan year, at least by October 1 for a calendar year plan.4

    Same as (5) Same as (4) No later than plan year-end – does not have to match fiscal year No later than plan year-end No later than plan year-end

    Deadline for making contribution Note: Employee salary deferrals should be deposited into the plan as soon as administratively feasible

    No later than due date including extension for filing employer’s tax return.

    Employee salary deferrals no later than 30 days following month withheld. Employer required contribution — same as (1).

    Employee salary deferrals no later than 15 business days following month withheld.3 Employer required contribution — same as (1).

    Same as (1) Same as (3) Same as (3) Same as (3) Contributions must be made no later than 8½ months after plan year-end.

    Quarterly; by 15th day after each quarter of the plan year. Interest penalties are charged if paid later Contribution deadline is 8½ months after plan year-end

    Non-ERISA (with only salary deferral) – no longer than is reasonable for proper administration ERISA – Employee salary deferrals no later than 15 business days following month withheld Employer contribution may be made any time during calendar year

    457(b) (with only salary deferral contributions) – salary deferral ongoing from payroll. May include designated Roth program.

    Maximum permitted eligibility requirements Eligibility requirements may always be less restrictive

    Age 21; worked for the employer at least 3 of the 5 preceding years; has received at least $600 in 2018 in compensation from the employer (subject to annual cost-of-living adjustments).

    Must be offered to all employees who have compensation of at least $5,000 in any 2 preceding years (whether or not consecutive) and expected to receive at least $5,000 in current calendar year.

    Age 21 and 1 year service (1,000 hours)

    Age 21 and 1 year service (1,000 hours) with graded vesting or 2 years of service with 100% vesting

    Age 21 and 1 year of service (1,000 hours) with graded vesting or 100% cliff vesting.

    Age 21 and 1 year of service (1,000 hours)

    Same as (6) Same as (4) Same as (4) Universal Availability requires all employees to be eligible to defer, with a few exceptions: • Work less than 20 hours per week • Eligible to participate in another 403(b), 401(k) or governmental 457(b) • Non-resident Alien

    None

    Vesting: Top-Heavy

    Non–Top-Heavy Contributions are immediately 100% vested.

    Employer contributions and employee salary deferrals are immediately 100% vested.

    Same as (2) 2 yrs. = 20% to 6 yrs. = 100% or 3 yrs. = 100%

    Same as (4) and Employee salary deferrals are immediately 100% vested.

    Employer required Safe Harbor contributions and Employee salary deferrals are 100% vested. All other employer contributions same as (5)

    Deferrals 100% immediately vested Safe Harbor contributions subject to 2-year cliff Schedule

    Same as (4) 2 yrs. = 20% to 6 yrs. = 100% or 3 yrs. = 100%

    3 yrs. = 20% to 7 yrs. = 100% or 5 yrs. = 100%

    Non-ERISA — not subject to ERISA vesting ERISA — 2 yrs. = 20% to 6 yrs. = 100% or 3 yrs. = 100% or any schedule at least as generous. Employee salary deferrals are 100% vested. Contributions must count for §415 limits only when fully vested

    Employee salary reduction contributions are immediately 100% vested. Employer contributions may vest over time according to plan terms.

    Compensation: $600 — 2018 minimum $275,000 — 2018 maximum

    No maximum for employee salary deferrals and employer match. $275,000 — 2018 (for employer 2% non-elective contribution)

    $275,000 — 2018 maximum Same as (3) Same as (3) Same as (3) Same as (3) Same as (3) Same as (3) $275,000 for 2018 No limit

    Contribution and benefits limit per participant

    Annual additions not to exceed lesser of 25% of compensation or $55,000 (25% of compensation for SARSEP) Employee salary deferrals in SARSEP limited to $18,500 ($6,000 catch-up at age 50 or older for SARSEPs) — 2018 Employees can’t make elective deferrals for a year if the employer had more than 25 employees who were eligible to participate at any time during the preceding year.

    Employee salary deferrals limited to $12,500 ($3,000 catch-up at age 50 or older) — 2018 Employer required contribution of: 1) $1 for $1 match up to 3% of pay*; or 2) 2% of pay non-elective * can be reduced to as low as 1% in any 2 years out of 5

    Employee salary deferrals limited to $12,500 ($3,000 catch-up at 50 or older) — 2018 Employer required contribution of: 1) $1 for $1 match up to 3% of pay; or 2) non-elective contribution of 2% of

    each eligible employee’s pay

    Annual additions not to exceed lesser of 100% of compensation or $55,000 ($61,000 including catch-up contributions) — 2018 Contribution limits are the lesser of 25% of compensation or $55,000.

    Employee salary deferrals Limited to $18,500 ($6,000 catch-up for 50 and older) — 2018 Annual additions not to exceed lesser of 100% of compensation or $55,000 ($61,000 including catch-up contributions) — 2018

    Same as (5) Employer Safe Harbor required contribution of: $1 for $1 match up to 3% of pay PLUS $.50 for $1 match on next 2% of pay; or at least 3% of pay non-elective contribution for all eligible employees. (A contribution of greater than 3% is permitted.)

    Same as (5) Employer Safe Harbor required contribution of: $1 for $1 match up to 1% of pay PLUS $ .50 for $1 on next 5% of pay; or 3% of non-elective contribution. Auto enrollment of 3%; Auto Deferral Increase to 6% not to exceed 10%.

    Same as (4) With a money purchase plan, the plan document states the required contribution percentage.

    Benefit not to exceed lesser of 100% of compensation (3-yr. average) or $220,000 — 2018 (reduced for normal retirement age below 62 and for years of plan participation less than 10)

    Annual additions not to exceed the lesser of 100% of c