Traditional 401(k)
Benefits
- Employee pre-tax deferrals up to 100% of
compensation or $14,000 1
- Discretionary employer profit sharing contributions
- Employee contributions by payroll deductions
- Possible employer match for employee contributions
- Available options - loans, vesting, hardship withdrawals,
rollovers
- Protection from creditors
- Participants age 50 or older can defer an additional $4,000
Limitations
- May prevent maximum deferrals for key employees
- Anti-discrimination test applies
- Annual IRS 5500 Report
- Moderate administrative detail
Employee Participation - Maximum Requirements
- Age 21 with one year of service - 1,000 hours
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Safe
Harbor 401(k)
Benefits
- Employee deferrals up to 100% of
compensation or $14,000 1
- Discretionary employer contributions
- Employee contributions by payroll deductions
- Options available - loans,
vesting, hardship withdrawals, rollovers
- Deemed to pass discrimination test
- May automatically meet top-heavy
contribution requirements
- Protection from creditors
Limitations
- Annual IRS 5500 Report
- Moderate administrative detail
- Requires annual election and notice
- Mandatory employer contributions
Employee Participation - Maximum Requirements
- Age 21 with one year of service - 1,000
hours
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Profit Sharing Plan
Benefits
- Maximum employer deduction 25% of compensation
- Individual contribution limit, lesser of 100%/$42,000 2
- May combine into a 401(k) plan
- Other options - vesting, withdrawals, rollovers, loans
- Protection from creditors
Limitations
- Annual IRS 5500 Report
- Moderate administrative detail
- Limited allocation options
- Salary deferral not allowable
Employee Participation - Maximum Requirements
- Age 21 with one year of service, then vesting schedule can apply
- Age 21 with two years of service, then 100% vested at entry
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Cross-Tested Profit Sharing
New Comparability
Benefits
- Target individuals or groups to maximize contributions
- Maximum employer deduction 25% of compensation
- Individual contribution limit, lesser of 100%/$42,000 2
- May combine into a 401(k) plan
- Other options - vesting, rollovers, loans
- Protection from creditors
Limitations
- Annual IRS 5500 Report
- Significant administrative detail
Employee Participation - Maximum Requirements
- Age 21 with one year of service, then vesting schedule can apply
- Age 21 with two years of service, then 100%
vested at entry
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Defined Benefit Pension
Benefits
- Maximize contributions and tax deductions
- Annual maximum individual benefit payable $170,000 3
- May credit service prior to plan inception
- Favorable to older and long tenured employees
- Protection from creditors
Limitations
- Recurring annual contribution
- Annual IRS 5500 Report
- Extensive administrative detail
- Actuary Certification required
Employee Participation - Maximum Requirements
- Age 21 with one year of service, then vesting schedule can apply
- Age 21 with two years of service, then 100%
vested at entry.
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Cash Balance Pension
- New Plan Only
Benefits
- Maximize contributions and tax deductions
- Annual maximum individual benefit payable $165,000 3
- May credit service prior to plan inception
- Favorable to older and long tenured employees
- Protection from creditors
Limitations
- Recurring annual contribution
- Annual IRS 5500 Report
- Extensive administrative detail
- Actuary Certification required
- Lump sum distribution upon retirement
Employee Participation - Maximum Requirements
- Age 21 with one year of service, then vesting schedule can apply
- Age 21 with two years of service, then 100%
vested at entry.
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Simplified Employee Pension
Benefits
- Maximum deductible contribution 25%/$42,000 4
- Flexible contribution amounts
- No annual IRS 5500 Report
- Less administrative detail
- Participants age 50 or older can defer an additional $2,000
Limitations
- No vesting schedule
- No federal protection from liens
- No hour requirements
Employee Participation - Maximum Requirements
- Age 21
- Employed three of past five years
- Compensation at least $450
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SIMPLE IRA
Savings Incentive Match Plan for Employees
Benefits
- Employee pre-tax deferrals
- Employer matching contributions
- Structured document
- No annual IRS 5500 Report
- Less administrative detail
- Satisfies discrimination/top-heavy testing
Limitations
- Maximum $10,000 employee deferral 5
- Mandatory employer contribution
- No vesting schedule
- No hour or age requirement
- Higher withdrawal penalties than qualified plan
- $2,000 Catchup
- Ages 50 and older
- $2,000 Catchup
- Ages 50 and older
Employee Participation - Maximum Requirements
- Employed past two years
- Minimum forecasted annual compensation $5,000
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Notes
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