Why adopt a 401(k) Plan?
401(K) plans have emerged as the primary retirement plan. Employees may defer part of their salary to a qualified 401(k) plan as pre-tax contributions or ROTH (after tax) contributions. The company sponsoring the plan may make contributions, but is not required to do so.
For example, the sponsoring company would have the option to match a certain percentage of the employee’s deferral which would increase the employee’s incentive to defer for their retirement security.
Any investment earnings are tax-deferred. Additionally, the contribution limits available to the participant are far more generous than IRAs or SIMPLE plans.
Why adopt a Profit Sharing Plan?
A Profit Sharing Plan is a discretionary defined contribution plan which provides employers with the opportunity to share company profits with their employees. The employer has the flexibility to choose a vesting schedule where employees earn the right to the company contributions over time.
A Profit Sharing Plan provides the employer with a key employee retention tool and a flexible retirement plan option.
Why adopt a Defined Benefit or Cash Balance Pension Plan?
Pension plans can allow for much greater contributions for owners than 401K or Profit Sharing Plans. Pension Plans focus on the accumulation of assets to fund retirement benefits. The contributions to a pension plan are determined and affected by the employee’s pay, years of employment, and age.
For employers desiring the maximum retirement contribution, these plans provide significant contributions to fund impressive pension accounts at retirement.
Why might I adopt a Combination of Plans?
The best design to maximize contributions for owners and key personnel might utilize a combination of plans. Our Building Block methodology leads to the design which best suits each company’s needs, and that design might utilize more than a single plan for optimum results.
Maximum Annual Compensation $275,000 $280,000
Elective Deferral Limit $18,500 $19,000
HCE Compensation Threshold $120,000 $125,000
Catch-Up Contribution $6,000 $6,000
DC Annual Contribution Limit $55,000 $56,000
Social Security Taxable Wage Base $128,400 $132,900