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
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Participant’s retirement benefits based on participant’s account balance
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Some plans may allow employees to contribute
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Depending on the type of plan, employer may be required to make annual minimum contributions
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Contribution limits of $5,000 to $49,0001, depending on the type of plan
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Depending on the type of plan, must cover some or all of the employees in all your businesses
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Easy to set up and operate
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No annual return required
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Annual nondiscrimination testing not required
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Little design flexibility
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No loans allowed
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Immediate vesting of all contributions
401(k) and Profit-Sharing Plans
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Participant’s retirement benefits based on participant’s account balance
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May allow employees to contribute through salary deferrals
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Depending on the type of plan, employer may be required to make annual minimum contributions
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Contribution limits of up to $49,0001 or more if catch-up contributions
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Must meet minimum coverage tests but can exclude some employees
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More complex to set up and operate
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Annual return usually required
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May require annual nondiscrimination testing
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Greater design flexibility
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Loans and hardship withdrawals allowed
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May delay vesting of some employer contributions
Defined Benefit Plan
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Participant’s annual retirement benefit determined by the plan’s benefit formula
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Higher annual retirement benefits possible, up to $195,0001 per year
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Actuary required to determine employer’s annual contributions
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Must meet minimum coverage tests but can exclude some employees
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Most complex to set up and operate
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Annual return required
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Annual nondiscrimination testing required
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Greater design flexibility
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Plan may allow loans
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May delay vesting of participants’ accrued benefit