What is ERISA?
The Employee Retirement Income Security Act of 1974, or ERISA, protects the assets of millions of Americans so that funds placed in retirement plans during their working lives will be there when they retire. According to the IRS, the Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets standards of […]
What Is a Cash Balance/401(k) Combo Plan
For those business owners who are seeking to make annual plan contributions in excess of the 401(k) limitations, the cash balance/401(k) combo plan is an amazing option. The ideal candidate for a combo cash balance/401(k) plan is a highly compensated business owner that is seeking larger contributions and greater tax deductions. The business should anticipate […]
What is a Cash Balance Plan?
A cash balance plan is a defined benefit plan that defines the benefit in terms that are more characteristic of a defined contribution plan. In other words, a cash balance plan defines the promised benefit in terms of a stated account balance. In general, defined benefit plans guarantee a specific benefit at retirement to each eligible […]
Advantages of a Defined Benefit Plan
Defined benefit pension plans provide a fixed, pre-established benefit for employees at retirement. Employers can contribute (and deduct) more than under other retirement plans. In addition, a defined benefit plan provides a predictable retirement benefit. Defined benefit pension plans offer workers a number of advantages when compared to other workplace retirement plans. They provide workers […]
What are the Types of 401(k) Plans?
With a 401(k) plan, employees can choose to defer some of their salary. Instead of receiving that amount in their paycheck, the employee defers, or delays, getting that money. In this case, their deferred money is going into a 401(k) plan sponsored by their employer. This deferred money generally is not taxed until it is distributed. […]
What is the Most Popular Type of 401(k) Plan?
Safe Harbor 401(k) Plans are very popular with business owners and plan participants alike. The Safe Harbor 401(k) provisions have some very big benefits and a few drawbacks. Beginning in 1999, the Safe Harbor rules were designed for 401(k) plans. These rules call for a company to make a specific contribution to each participant in the […]
What is a Third-Party Administrator?
Many small business retirement plans will appoint the employer as the plan administrator. However, in most cases, and for good reason, the employer will appoint a third-party entity, better known, as a third-party administrator (“TPA”) to perform the duties associated with the plan administrator. By appointing a TPA, the employer can outsource the esoteric day-to-day […]
Why Do I Need an Actuary for My Defined Benefit Plan?
According to the IRS, actuaries assess the financial consequences of risks and use mathematics, statistics and financial theory to analyze and determine the financial impact of uncertain future events. Pension actuaries suggest methods to eliminate or reduce damage to parties if a future event occurs. They are primarily concerned with the payment of benefits, including […]
The Power of the Cash Balance/401(k) Combo Plan
In a cash balance plan, the rules do not limit the annual contribution amount but instead limit the ultimate benefit payable from the plan. The current maximum benefit is a life annuity of $245,000 per year payable beginning at age 62, subject to adjustments based on age and years of service and participation. The lump […]
How do 401(k) Plan Contributions Work?
Two of the advantages of participating in a 401(k) plan are: (i) elective deferrals to the plan and investment gains are not subject to federal income taxes until distributed from the plan and (ii) elective deferrals are always 100% vested. In all 401(k) plans, participants can contribute through salary deductions and it is 100% elective. […]
