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The Haberman Group, Inc. will tailor a Retirement Plan to meet your company's needs, objectives and budget. Whether you are looking to establish a new plan or enhance an existing plan, we will provide complete administrative services and keep employer responsibilities and costs to a minimum.
Simplified Employee Pension (SEP)
Tax-favored retirement plan in which an employee contributes to a SEP-IRA which can be established for each eligible employee.
Employer may contribute to an employees IRA account up to 25% (as of 2005) of the employee's earnings or $42,000 whichever is less. Employer SEP contributions are excluded from the employee's pay and are not included on the employee's W-2 form.
Employee Advantages:
- Maximum contributions apply
- Employer contributions are tax-deductible
- Funds accumulate on a tax-deferred basis
Employer advantages:
- Employers are not required to make contributions each year
- Few IRS regulations apply
Simple IRA Plan
SIMPLE IRA contributions are not subject to the same $4,000 cap as a traditional IRA maintains. Instead, the amount one can defer is $6,000 more, or $10,000 total. This amount must be expressed as a percentage of annual compensation.
Like the SIMPLE 401(k), the participant must have received at least $5,000 in compensation during the previous 2 years and expect to receive at least that much the current year.
Mandatory Employer Contributions
As regards employer contributions, the employer is required to match up to 3% of the participant's compensation for the year, match deferrals up to a lower percent of compensation, but the match can be as low as 1%, in no more than 2 out of 5 years. Or the employer can opt to make non-elective contributions of 2% of compensation for each participant who has earned at least $50,000, but not more than $160,000.
Simple 401(k) Plan
Under current law, a SIMPLE 401(k) plan allows elective salary deferrals to a maximum of $10,000, providing the participant has received $5,000 of compensation in the preceding year.
Although the rules for SIMPLE 401(k) plans and regular 401(k) plans are very similar, where they differ lies in the absence of having to comply with nondiscrimination tests and top heavy testing, providing:
Simple rules that apply to a Simple 401(k):
- Deferrals do not exceed $10,000 per person (with limitations)
- All contributions are vested
- The plan sponsor elects to match the employee's deferrals up to 3% of the participant's wages, or under a non-elective option 2% of the total compensation for the eligible employee
Traditional 401(k) Plan
A 401(k) plan is a type of retirement plan, which is named for a section of the tax law that allows employees to contribute a portion of their compensation, before income taxes, to a company sponsored retirement plan.
All contributions are paid with pretax dollars, and income from the invested savings continues to multiply tax-free over the years as long as it remains in a qualified plan. Taxes are paid only when the money is withdrawn, usually at retirement.
Under current law, 401(k) plan participants are allowed an annual deferral limit of $14,000 (for 2005) and all contributions are made with pre-tax dollars.
Employer Advantages:
- Corporate tax advantages
- Flexibility
- Low Administrative Cost
- Attract and maintain employees
Employee Advantages:
- Tax savings
- Payroll deductions
- Variety of Investment options
- Vesting and Portability
- Retirement Savings
Profit Sharing Plan
A traditional Profit Sharing plan, is a tax qualified pension plan. This type of plan is commonly utilized by self-employed business people or sole proprietors.
Like other qualified plans, the contributions are made with pretax money and all earnings accumulate tax free until withdrawal. However, self-employed people who are deemed as an owner/employee cannot contribute to this plan unless they provide benefits for all other full time, eligible employees. Employer contributions, on the other hand, do not have to be made each year.
Lastly, as with any other tax qualified plan, the plan must be in writing prior to the end of the taxable year for which the deduction are claimed.
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| For more information, please e-mail us or contact our staff at 631.499.1180 |
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