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Why Do I Need a Qualified Retirement Plan?
What Type of Retirement Plan Is Best for My Firm?
How Do I Know Which Type of Plan We Need?
What Are the Steps to Implementing a Retirement Plan?
Your Responsibilities







Why Do I Need a Qualified Retirement Plan?

Ask yourself the following questions; would I like to "save" for retirement with pre-tax money? Would I like to provide my employees with a tangible employee benefit? Would I like to deduct retirement plan contributions and certain administrative expenses at the company level? If the answer to any one of these questions is yes, then you need a qualified retirement plan! It is one of the best tax shelters available. It is almost like having the government pay you to save for retirement. Furthermore, a retirement plan can be specifically designed to strongly benefit business owners and key employees. In addition, following are some other benefits to having a retirement plan:

  • Attract and retain good employees, thereby reducing employee turnover.
  • Increase employee incentive and accumulate funds for retirement.
  • Investment earnings accumulate tax-free until distribution.
  • Plan design can maximize benefits for the owners.
  • Life insurance may be included using pre-tax dollars.
  • The employee pays no tax on money contributed for the employee's benefit until a distribution is made.





What Type of Retirement Plan Is Best for My Firm?

Retirement plans typically fall into two categories: Defined Benefit or Defined Contribution. A Defined Benefit plan is more commonly known as a "pension" plan. It provides for a monthly benefit at retirement that is based on a formula, which typically includes compensation and years of service. The annual contribution is actuarially determined utilizing certain assumptions such as mortality, interest, turnover, salary scale, etc.

A Defined Contribution plan does not typically pay a monthly benefit at retirement. Instead, an individual account is established for each participant, into which "contributions" (funds put into the plan by the employer or employee or both), forfeitures, income, expenses, gains and losses are allocated. These allocated amounts accumulate tax-free until they are distributed at retirement, termination, disability or death. Following are some different types of defined contribution plans, such as:

  • Profit Sharing Plans
  • Defined Benefit Plans
  • Cash Balance Plans
  • 401(k) Plans
  • Money Purchase Plans
  • Target Benefit Plans
  • Thrift or Savings Plans
  • Employee Stock Ownership Plans (ESOPs)
  • Savings Incentive Match Plans for Employees (Simple plans)
  • Simplified Employee Pensions (SEPs)
  • Age-Weighted, Cross-Tested and other





How Do I Know Which Type of Plan We Need?

The first step is to ascertain what objectives your firm is seeking to accomplish: hire key employees away from competition, reduce employee turnover, establish a market for owners' stock in a closely held corporation and/or build a tax-sheltered retirement fund for owners and key employees.

Next, you must decide on what level of contributions your business would be comfortable with and able to afford on an annual basis.

Finally, your personal objectives must be ascertained, which may include; maximizing your retirement benefits, maximizing your contributions and/or having annual contributions that are flexible.

Even after determining the foregoing objective, the type of plan that your firm ultimately installs will depend on a large number of factors. There is no easy answer and a good plan design is critical in order to meet your company's expectations.

If you would like more details, please contact us via e-mail or by telephone. We will be happy to provide you with a complete proposal, including options, costs, responsibilities and services.





What Are the Steps to Implementing a Retirement Plan?

There are several steps to implementing a retirement plan:

  1. The process begins with a Pension Investors Corporation consultant who will help you determine your retirement plan needs.

  2. Using the information you provide, Pension Investors Corporation will design a retirement plan that will be appropriate to both the company's needs and the owner's needs.

  3. We will then present you and your counsel a legal document to review and execute. This document will outline all of the retirement plan provisions. Your Pension Investors Corporation consultant will review the document with you, ensure that you understand and agree with the provisions.

  4. Once the document has been executed, it will be sent to the Internal Revenue Service to request approval.

  5. The enrollment process may then begin. This includes providing employees with enrollment forms, designation of beneficiary forms, information about the new plan, answering questions, and a special document called a Summary Plan Description.

  6. Once employees have enrolled in the plan, the installation is complete.






Your Responsibilities

As a third party administrator (TPA), Pension Investors Corporation will provide administrative services for your plan. However, your company will also have certain responsibilities with regard to your plan. Typically, your company's responsibilities include:

  • Overall Plan Operation.
  • Selecting a Plan Design that is best for meeting company's objectives.
  • Preparing a written statement of plan's investment policy.
  • Contracting with a Third Party Administrator (TPA) to provide record-keeping services, including measures needed to comply with Federal Qualification standards.
  • Providing the TPA with complete and accurate employee data, including social security numbers, dates of birth, hire and termination of employment.
  • Maintaining plan records in a place that will provide ready access, including plan documents, Summary Plan Descriptions and Plan valuation reports provided by the TPA.
  • Administering the plan in accordance with ERISA requirements and complying with TPA requests regarding same.
  • Communicating plan to Employees. Distributing employee statements and IRS Filing information. Distribution of Summary Plan Descriptions. Answering employee questions.
  • Making plan contributions on a timely basis and providing TPA with complete list of contributions with dates, amounts and check numbers.
  • Keeping TPA informed as to investment strategy and any new investments, loans, etc. This is necessary for continued compliance with federal regulations. It is also necessary for avoidance of penalties and interest on PROHIBITED TRANSACTIONS.
  • Providing TPA with annual information regarding insurance products purchased by the plan. This includes policy information, premiums paid, cash surrender values, Schedule A information and 1099's for the PS-58 costs. The insurance company should send this information to you. It must be forwarded to your TPA.
  • Making distribution of Plan benefits as soon as possible after being advised by TPA of the need for such payments. Providing TPA with copies of all participant election forms, properly executed and dated. TPA will provide forms.
  • Providing confirmation of benefit payments and tax deposits to TPA each year. Without this confirmation, required 1099's cannot be prepared.
  • Securing a Fidelity Bond for the trust and provide complete copy of same to TPA.
  • Depositing tax withholdings by the 15th day of the month following a distribution.
  • Depositing employee contributions in plan accounts immediately after each payroll period.






Together, Pension Investors Corporation and your firm can establish a valuable retirement plan that will enable you and your employees to realize a better tomorrow. We look forward to working with you.