Pension Investors Corporation, providing administrative services for employee benefits. Find us under Pension,401(K),pension administrators,qualified plans,PENSION administration,actuarial services,investments,profit sharing,employee benefits,simple 
plans,SEP,ESOP,defined benefit,money purchase,target benefit,cross-tested,insurance,TPA,stock options,Florida
HOME

Qualified Plans


Plans that are "blessed" by the IRS are called qualified plans and are eligible for favorable tax treatment. That means contributions are tax-deductible, employees may contribute using pre-tax monies (when allowed by the plan), and earnings on investments accumulate tax-free until withdrawn at retirement or as a result of termination of employment, disability or death.

Some qualified plans can also be "integrated" with Social Security. This basically means that plan benefits or contributions can be offset by benefits that the participant will receive from Social Security. This allows a somewhat larger benefit for more highly paid employees.

Qualified plans can also be custom designed to reflect the specific demographic make-up of your company. For example, if one or more of the owners of the company is 10 years older than most of the employees, the resulting benefits for that owner can be truly amazing.  Alternatively, groups of employees can be classified by their position or other "like characteristic", and allocations can be made available to various groups at different qualifying levels.  For more information, contact Pension Investors Corp.

The following links lead to a brief description of some of the more popular qualified plans:

Profit Sharing Plan
401(k) Plan
Money Purchase Pension Plan
Employee Stock Ownership Plan ("ESOP")
Target Benefit Pension Plan

Defined Benefit Pension Plan

   Cash Balance Plan

 






Profit Sharing Plan:


A Profit Sharing Plan is the most flexible type of plan with respect to the amount of contribution made each year. Contributions are generally discretionary from year to year, but the company must implement the plan with the objective of making"substantial and recurring" deposits. In years when the company may not be as fiscally able to make a contribution as in other years, it may elect to either forgo or substantially limit the amount of contribution to be made for that particular year. The basic premise is that the plan may choose to share company profits with the employees. The plan must define the formula for allocating contributions to employees, and the allocations must satisfy IRS non-discrimination rules.  However, not all employees must be treated alike. Some of the methods used to allocate contributions are; age-weighted, tiered, points, super-integrated, new comparability, cross-tested, permitted disparity (a.k.a. integrated) and pro-rata. The maximum deductible contribution that may be made by the company for any one year is 25% of eligible compensation. However, some participants may receive a contribution allocation greater than 25% of their compensation due to the allocation formula. The maximum contribution for a given participant in any given year cannot exceed the lesser of $55,000 (2018 limit; $54,000 for 2017) or 100% of the participant's compensation.


 

 

 

 

401(k) Plan:


Currently, 401(k) plans are the most popular type of plan with both employees and employers. These plans allow for pre-tax employee contributions, with or without matching employer contributions. Employee contributions ("deferrals") are limited by law to a specific annual amount. In 2018, the maximum deferral amount is limited to $18,500, or $24,500 for those age 50 or older.  This amount is indexed and may be increased from time to time. The sum of all employee and employer contributions for a given participant in any given year cannot exceed (for 2018) the lesser of $55,000 or $61,000 for those age 50 or older (as  indexed) or 100% of the participant's compensation (For 2017 the amounts were $54,000 and $60,000 respectively).

 

 

 

 

Money Purchase Pension Plan:


Contributions to a Money Purchase Pension Plan are mandatory and usually based on a percentage of each participant's compensation. Many of the same contribution allocation methods that can be used in a Profit Sharing Plan may be used in this type of plan. However, the mandatory obligation to make a contribution makes this plan different from a Profit Sharing Plan. If the company fails to make the required contribution, a penalty tax could be imposed. The maximum deductible contribution that may be made by the company for any one year is 25% of eligible compensation. The maximum contribution for a given participant in any given year cannot exceed the lesser of $55,000 (2018 limit; $54,000 for 2017) or 100% of the participant's compensation.

 

 

 

 

Employee Stock Ownership Plan ("ESOP"):


ESOPs allow employees to become stockholders in the company and shareholders to have a ready market in which to sell their stock. Most importantly, it can become part of an "exit" strategy for the owner of a closely held corporation. Employee Stock Ownership Plans provide benefits similar to those of profit sharing plans, including that the contributions by the employer are also not necessarily dependent on profits. Although contributions to these plans must primarily be made in shares of company stock, they can also be made with cash.

 

 

 

 

Target Benefit Pension Plan:


A Target Benefit Pension Plan is a cross between a Defined Benefit Pension Plan and a Money Purchase Pension Plan. A "target" benefit is established similar to that of a Defined Benefit Pension Plan. Contributions are then actuarially determined based upon an amount needed to pay for this benefit at the participant's retirement age. However, in no event can a participant receive a contribution greater than could be received in a Money Purchase Pension Plan.

 

 

 

 

Defined Benefit Pension Plan:


This type of plan provides an employee with a pre-defined monthly benefit beginning at Normal Retirement Age.  As a specific benefit promise is made, the employer is permitted to deduct whatever amounts are required, assuming reasonable actuarial assumptions and cost methods. These plans require the certification of an enrolled actuary and may require additional government reporting.

 

 

 

 

Cash Balance Plan:

This type of plan is a defined benefit plan, but exhibits the characteristics of both a defined benefit Plan and a defined contribution plan.  The plan establishes a separate account for each participant.  Each year a participant receives a contribution, typically computed as a flat percentage of the employee's compensation, such as 5% or 10%.  In addition, the account balance grows based on a pre-determined interest rate. The employer contribution is determined actuarially, assuming reasonable actuarial assumptions and cost methods. These plans require the certification of an enrolled actuary and may require additional government reporting.

 

 

 

 

| HOME | WHO WE ARE | PLAN TYPES | NEWS | SERVICES |
| INFORMATION | CONTACT US | LINKS |

 
   

 

 

POWERED BY SOURCESTUDIOS.COM