Retirement Plans for Small/Mid Sized Companies

 

Employer-sponsored retirement plans provide value to employers and their employees.  Retirement Plans give the employers a distinct advantage in attracting and retaining quality employees.  They also provide employers and employees with a convenient tax advantaged way to save for retirement.

If You Already Have a Retirement Plan, Why Consider Us?
If your company already has a retirement plan, you may be able to gain additional benefits by transferring it to us: 

  • Low costs.
  • Investment flexibility.
  • Investment guidance. Our consultants will help you develop an investment strategy to suit your plan’s goals

Kiper Retirement Consultants works one on one with companies to identify and implement individulized retirement plans.  There are a number of plans available.  Below are highlights of some of the more popular types that companies may offer.  If you would like to learn more about setting up a retirement plan for your company, please contact Kiper Retirement for a initial consultation.

Employer Sponsored Plans

  • Money Purchase plan 
  • Profit sharing plan
  • One man 401(k)
  • 401(k)
  • SIMPLE IRA
  • SEP IRAs.
  • Roth 401(k)

 

Money-Purchase Pension Plans


In a money-purchase pension plan, the employer’s annual contribution is mandatory and is based on a fixed percentage of compensation.

  • Current regulations permit annual contributions of up to 25 percent of all participants’ gross income, not to exceed $49,000 (in 2011)  for any participant   
  • Contributions are based on a fixed percentage of compensation
  • Employer contributions must be made every year

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Profit Sharing Plan

The profit-sharing plan is employer-funded and offers the greatest flexibility to the employer in terms of timing and amount of contribution. Each year stands on its own.  Under the original rules for profit-sharing plans, employer contributions could be made only from business profits — hence the name. Current law eliminates this restriction, so the amount to be contributed each year is at the discretion of the employer.

  • The employer’s maximum annual deductible contribution is 25 percent of all participants’ gross income, not to exceed $49,000 (in 2011) for any participant
  • Contributions are flexible and at employer’s discretion
  • Contributions are allocated by formula to participants
  • Employer contributions can be based on profits
  • Retirement benefit is based on contributions, earnings and length of service
     

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401(k)/One Man 401k

The 401(k) plan is a type of profit-sharing plan that allows an employee to make his or her own contributions.  The plan may allow employee deferrals only; but most provide an employer’s contribution either in the form of a “match” or as a regular discretionary profit-sharing contribution at the plan’s year-end valuation.

  • Plan may be funded by company contributions, employee contributions only, or a combination of both
  • Employees contribute on a pre-tax basis
  • Employee and employer contributions grow tax-deferred
  • Employer contributions to the plan may not exceed 25 percent of the payroll of eligible employees
  • Employers receive a separate deduction for the total of all employees’ contributions
  • Annual additions to an individual’s account may not exceed 100 percent of pay or $49000, whichever is less (2011 limits)
  • Special non-discrimination testing is required

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SIMPLE IRA

A SIMPLE IRA plan is similar to a traditional 401(k) plan. The SIMPLE plan allows employees to contribute a portion of their income to the plan on a pre-tax basis. There is a required contribution that the company makes on behalf of the employees.  SIMPLE plans offer exemption from many of the complex rules that apply to the traditional 401(k) plan.

The employer sponsoring a SIMPLE plan must make a contribution that matches the first 3 percent of pay contributed by each participating employee. The employer may reduce that percentage to no less than 1 percent of compensation in any two of five consecutive years. As an alternative, the company could make a contribution of 2 percent of pay for each eligible employee who has earned at least $5,000 for the year, even to those who have chosen not to make their
own contributions to the plan.

Any employer who employs 100 or fewer employees who earned at least $5,000 in compensation during any two preceding years, and who does not already maintain a qualified plan can establish a SIMPLE plan. 

A SIMPLE IRA plan can be established in conjunction with an Individual Retirement Account or Annuity (IRA) for each employee. There is some flexibility for the employer’s mandatory contribution.

 

Employer contributions

  • may be changed annually
  • minimum contribution required for all eligible employees earning at least $5,000 during the year OR dollar-for-dollar match up to 3% of pay  — may be reduced to as low as 1% for two of every five years; elective contribution 2% of gross pay ,non-elective contribution

For 2011, $28,000 is the maximum annual allocation to a participant’s account ($11,500 deferral, plus $11,500 maximum match†; $2,500 catch-up contribution and $2,500 matching contribution, if applicable). Limited to 3% of compensation.  All employer and participant contributions are immediately vested.

 †Compensation of at least $383,333 is required for the $11,500 maximum match.

 

Participant Deferrals

participant deferral is $11,500; the maximum annual participant deferral for those age 50 or older is $14,000 (2,500 catch up contribution).  The participant controls the distributions, and all employer and participant contributions are immediately vested. 

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SEP IRA

The Simplified Employee Pension (SEP-IRA) permits employers to make the same tax-deductible contributions as qualified plans allow, without the burden of reporting, complicated administration, and costs. You simply make the contributions directly into the IRAs of the plan participants. The contribution limits are 25 percent of total compensation up to a maximum of $49,000 (for 2011) per participant. A major difference is that all contributions belong to the employee immediately upon deposit into the employee’s IRA. Also, you must include all employees earning more than $550 in determining eligibility for 2011. 

  • All company contributions are immediately 100 percent vested and available to the participants
  • Part-time employees may not be excluded
  • Company contributions are tax-deductible for the employer and neither contributions nor earnings are taxed to participants until distributed
  • Employer contributions are made into IRA accounts and are not placed in a trust account
  • Little or no government reporting is required
  • SEPs may be established and funded up until tax-filing time, including extensions
  • SEPs may be established for one year only, or can be contributed to year after year

This is for informational purposes only and should not be construed as tax advice. Please consult your tax advisor. 

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