Other Plan Designs Evan Rapp
New Comparability/Cross Tested
This type of profit sharing Plan uses an allocation formula to divide employees into groups; classifying them as “preferred” and “non-preferred”. Based upon relative age and compensation, contributions are allocated within each group. Adding a 401(k) salary-deferral option is allowed with this type of Plan design. Complex actuarial contribution calculations and nondiscrimination testing are typically associated with these types of Plans. Click HERE for more information.
This type of profit sharing Plan uses an allocation formula to divide employees into groups; classifying them as “preferred” and “non-preferred”. Based upon relative age and compensation, contributions are allocated within each group. Adding a 401(k) salary-deferral option is allowed with this type of Plan design. Complex actuarial contribution calculations and nondiscrimination testing are typically associated with these types of Plans.
This type of defined contribution Plan allows for participating employees to make contributions to their company’s retirement Plan before taxes are deducted from their pay. There are several types of 401(k) Plans such as safe harbor 401(k)s, SIMPLE 401(k)s, and others, which can have a variety of differing features and requirements.
This type of pension Plan is linked to a person’s Social Security benefits. A person’s pension Plan benefits are combined with his or her Social Security payments to reach to a specific total amount. A pension benefit may be reduced by up to 50% depending on a person’s actual Social Security payment to attain a specified total pension goal.
This type of Plan requires set annual employer contributions to Plan participants. Participants may also contribute in this type of Plan. Money Purchase Plans can be implemented in addition to some other Plan types, potentially allowing for high savings rates. However, if the set minimum contribution requirement is not satisfied, an excise tax may be applied. Like other Plan types, Money Purchase Plans are subject to anti-discrimination testing and it requires the filing of a Plan 5500.
This type of Plan is a defined benefit Plan, not a defined contribution Plan, which defines a “pay credit” and an “interest credit” for each participant, which can be fixed or linked to a variable rate. When a participant becomes entitled to his or her benefit, typically upon retirement, a participant may have the option to collect the benefit via annuity-type payments based upon his or her account balance, or as a lump-sum payment.
Commonly referred to as pension plans, this type of Plan is funded by the employer, not the employee, and it promises participants a specific monthly benefit upon their retirement. Benefits are often calculated factoring an employee’s age, years of service, and salary. They are governed by the Federal Employee Retirement Income Security Act (ERISA) and are, in most cases, insured by the Pension Benefit Guaranty Corp.
This term typically refers to a “non-qualified” deferred compensation agreement in which an employee consents to receive a withheld portion of salary as payments at a later point in time. The payments made by the employer are not tax-deductible and are not limited to caps imposed on “qualified”, (ERISA compliant), defined contribution or defined benefit Plans. Deferred compensation is available to senior management and highly compensated employees, and it can be offered as a retention tool when there is a risk that an integral employee may leave the company.