understanding retirement plan alternatives for small businesses presented by: mark m. gutrich...

UnderstandingRetirement Plan Alternatives

for Small BusinessesPresented by:

Mark M. GutrichPresident & CEO

ePlan Services, Inc.

What Are The Basic Options?

• Simplified Employee Pensions (SEP)– Any small business with/without employees

• Savings Incentive Match Plan (SIMPLE)– Any employer with less than 100 employees

• Profit Sharing/401(k) Plan– Any size company, including sole proprietors

• Safe Harbor 401(k) Plan– Any size company, typically less than 100 employees

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What is a SEP?BASICS

• IRS Form 5305-SEP

• Minimum Eligibility (Fixed):– 21 Years of Age– Earned $450 in current year– Employed 3 of 5 Years

• Maximum Contribution:– 25% of Compensation– Up to $46,000/year– No employee deferrals

PROS & CONS

PROS:

• Easy to Set-Up & Maintain• No Mandatory Contributions• No Discrimination Testing• No Annual Tax Filings

CONS:

• Must Include ALL Employees• Same Contributions for ALL• 100% Employer Funded• 100% Employee Owned

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What is SIMPLE?BASICS

• IRS Form 5305-SIMPLE• Minimum Eligibility (Fixed):

– Earned $5,000 in any 2 past yrs– Likely to Earn $5,000 current yr

• Mandatory Contributions:– 2% of Annual Compensation

- OR –- 3% Match on Deferrals

• Elective Deferrals:– 100% of Compensation– Up to $10,500/year

PROS & CONS

PROS:• Easy to Set-Up & Maintain• No Discrimination Testing• No Annual Tax Filings

CONS:

• Must Include ALL Employees• Low Elective Deferral Rates• Mandatory ER Contributions• Cannot Make Addtn’l Contrib• 100% Immediately Vested

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What is a Profit Sharing/401k?BASICS

• Plan Adoption Agreement• Flexible Eligibility:

– 18 to 21 Years of Age– Worked 1,000 hours/year

• Optional Contributions:– Deferral Matching– Profit Sharing


PROS & CONS

PROS:• Easy to Set-Up & Administer• No Mandatory Contributions• Permitted Disparity Designs• Optional Vesting Schedules• Optional ROTH Contributions• Optional Loan FeatureCONS:• Annual Tax Filings• Annual Administration Fees• Annual Discrimination Tests

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What is a Safe Harbor 401k?BASICS

• Plan Adoption Agreement• Flexible Eligibility:

– 18 to 21 Years of Age– Worked 1,000 hours/year


- OR –– 3.5% to 4% Match on Deferrals


PROS & CONS

PROS:• Easy to Set-Up & Administer• No Discrimination Testing• Optional Profit Sharing• Optional Vesting Schedules*• Optional ROTH Contributions• Optional Loan FeatureCONS:• Annual Tax Filings• Annual Administration Fees• Mandatory ER Contributions

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How Do They Compare?2009 Maximum Deductible Contributions for Incorporated Businesses

W-2 Income $25,000 $50,000 $100,000 $150,000

SEP-IRA $6,250 $12,500 $25,000 $37,500

SIMPLE – IRA/401k*

Normal w/ Catch-Up (Age 50+)

$12,000$14,500

$12,500$15,000

$13,500$16,000

$14,500$17,000

Profit Sharing/401k


$16,500$22,000

$29,000$34,500

$41,500$47,000

$49,000$54,500

Safe Harbor 401k*


$17,250$22,750

$30,500$36,000

$44,500$50,000

$49,000$54,500

*Includes Non-Elective Employer Contribution Amounts

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How Do They Differ?SEP-IRA SIMPLE SH 401k PS 401k

$1,500 Tax Credit Easy to Set-Up & Maintain Integrated with SurePayroll Exclude Part-Time Employees Optional Employer Contributions Vesting of Employer Contributions Optional ROTH Contributions Optional Loan Feature No Discrimination Testing No Annual Administration Fees No Annual Tax Filing

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SEP v. PS/401(k)SEP

• No Administrative Fees• No Annual Tax Filings• No Discrimination Testing• Max Contrib = Lesser of:

– 25% Compensation– Up to $46,000

• Must Include ALL Employees– Including Part-Timers

• No ROTH Contributions• No Pre-Retirement Access

SOLO(K)

• Low Administrative Fees• No Annual Tax Filings• No Discrimination Testing• Max Contrib = Lesser of:


• May Exclude Employees– Vesting Schedules Available

• Optional ROTH Contributions• Optional Loan Feature

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SIMPLE v. SH401kSIMPLE

• No Administrative Fees• No Annual Tax Filings• No Discrimination Testing• Must Include ALL Employees• Max Personal Deferral:



- OR –– 3% Match on Deferrals

• 100% Immediately Vested

SAFE HARBOR 401(K)

• Low Administrative Fees• Easy Annual Tax Filings• No Discrimination Testing• May Exclude Employees• Max Personal Deferral:



- OR -– 3.5% to 5% Match on Deferrals

• Up to 2 yr Vesting Schedule*

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How Do I Choose?

• SEPWilling to fund entire plan, without employee help

• SIMPLEWilling to unconditionally give employees money/yr

• Traditional 401kNot sure if you can afford to make contributions/yr

• Safe Harbor 401(k)Willing to conditionally offer employees money/yr

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Questions & Answers

understanding retirement plan alternatives for small businesses presented by: mark m. gutrich...

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