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