Easy Retirement Plan Guide and Explanation for Small Employers

To  help you narrow your search for a retirement plan that is right for your business, we asked CPA Brian Dooley, who is also an International Tax Expert, to give us a smple outline of your options regarding retirement planning.

This is a small excerpt from a much larger article that includes links to the IRS. See more about these issue and Brian at: www.IntlTaxCounselors.com

Plans With IRAs

  • Participant’s retirement benefits based on participant’s account balance

  • Some plans may allow employees to contribute

  • Depending on the type of plan, employer may be required to make annual minimum contributions

  • Contribution limits of $5,000 to $49,0001, depending on the type of plan

  • Depending on the type of plan, must cover some or all of the employees in all your businesses

  • Easy to set up and operate

  • No annual return required

  • Annual nondiscrimination testing not required

  • Little design flexibility

  • No loans allowed

  • Immediate vesting of all contributions

 

401(k) and Profit-Sharing Plans

  • Participant’s retirement benefits based on participant’s account balance

  • May allow employees to contribute through salary deferrals

  • Depending on the type of plan, employer may be required to make annual minimum contributions

  • Contribution limits of up to $49,0001 or more if catch-up contributions

  • Must meet minimum coverage tests but can exclude some employees

  • More complex to set up and operate

  • Annual return usually required

  • May require annual nondiscrimination testing

  • Greater design flexibility

  • Loans and hardship withdrawals allowed

  • May delay vesting of some employer contributions

Defined Benefit Plan

  • Participant’s annual retirement benefit determined by the plan’s benefit formula

  • Higher annual retirement benefits possible, up to $195,0001 per year

  • Actuary required to determine employer’s annual contributions

  • Must meet minimum coverage tests but can exclude some employees

  • Most complex to set up and operate

  • Annual return required

  • Annual nondiscrimination testing required

  • Greater design flexibility

  • Plan may allow loans

  • May delay vesting of participants’ accrued benefit

Brian  Dooley, CPA, MBT  www.IntlTaxCounselors.com

Direct 949-939-3414   Fax 949-269-6355

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