401(k) Profit Sharing
|Who it's for||Self-employed individual, contractor, or small business owner, including those with employees. Available to sole proprietors, partnerships, C corporations, S corporations.||Businesses with 100 or fewer employees and self-employed individuals. Available to sole proprietors, partnerships, C corporations, S corporations.||Self-employed individual or business owner with no employees other than a spouse||Any type of public or private company||Any type of public or private company. Generally most appropriate for companies with high revenue and consistent growth.|
|Key advantages||Easy to set up and maintain||Salary deferral plan with less administration||A 401(k) with potentially higher contribution limits than SEP IRA||Flexibility in plan design||High contribution limits while minimizing employee cost.|
|Investment Options||Wide range of investment choices||Wide range of investment choice||Wide range of investment choice||Wide range of investment choice||Wide range of investment choice|
|Fees||No initial setup fee or annual maintenance fee||No initial setup fee or annual maintenance fee||No initial setup fee or annual maintenance fee||Varies by plan and participants. Index Gurus will provide you with a free cost/benefit analysis.||Varies by plan and participants. Index Gurus will provide you with a free cost/benefit analysis.|
|Who can contribute||Funded solely by employer contributions||Funded by employee deferrals and employer contributions||Funded by employee deferrals and employer contributions||Funded by employee deferrals and employer contributions||Typically funded by employer contributions in the private sector, but the public sector often requires employee participation.|
|2014 employee contribution limits||Not applicable||Up to $12,000 in salary deferrals; $14,500 if age 50 or older (2014)||Up to $17,500 in salary deferrals; $23,000 if age 50 or older||Up to $17,500 in salary deferrals, or $23,000 if age 50 or older (limits may vary by plan) (2014)||An actuary associated with the Index Gurus team will let you know how much to contribute each year.|
|2014 employer contribution limits||Up to 25% of W-2 income (inc) or 20% of adjusted earned income (sole-proprietor), up to a maximum of $52,000 (2014)||Either match employee contributions up to 3% of compensation; can be reduced to 1% in any two out of five years or contribute 2% of each employee's compensation, up to $5,200 (2014)||Employers may contribute up to 25% of compensation up to a maximum of $52,000.||Employers may make a matching contribution or profit sharing contribution up to 25% of compensation up to a maximum of $52,000. (2014) Total employer/employee contributions cannot exceed $52,000. ($57,500 if age 50)||An actuary associated with the Index Gurus team will let you know how much to contribute each year. The max benefit at retirement in 2014 is $210k or 100% of final average pay.|
|Employer Deductibility||Contributions are deductible as a business expense and NOT required every year.||Contributions are deductible as a business expense and required every year.||Contributions are deductible as a business expense and NOT required every year.||Contributions are deductible as a business expense and NOT required every year.||Contributions are deductible as a business expense and are most often required every year.|
|Administrative responsibilities||Form 5305-SEP to setup. No employer tax filings; employee notification for employer's contribution, participation and eligibility.||Form 5305-SIMPLE to setup. No employer tax filings; employee notification for employer's contribution, participation and eligibility.||Annual Form 5500 filing after plan assets exceed $250,000||Form 5500 and special IRS testing to ensure plan does not favor highly compensated employees||Annual filing of Form 5500 is required. An enrolled actuary must sign the Schedule B of Form 5500.|
|Access to assets||Withdraw at any time, but a 10% penalty may apply if you are under age 59½.||Withdraw at any time, but a 10% penalty may apply if you are under age 59½. If the withdrawal is taken within first two years of participation in the plan, that penalty increases to 25%.||Cannot take withdrawals from the plan until a "trigger" event occurs, such as turning age 59½, disability, and/or plan termination||Loans may be available. Hardship withdrawals may be available but a 10% penalty may apply if you are under age 59½. Withdrawals can be taken upon a "trigger" event such as turning age 59½, disability, termination of employment, and/or plan termination.||Loans may be available based on design. In-service withdrawals not permitted prior to age 62.|
|Plan setup deadlines||Establish by employer's tax filing deadline, plus extensions, usually April 15.||Establish by October 1.||Establish by December 31 (or fiscal year-end).||Deadline is based upon the plan selection. Call 408-372-PLAN find out more.||Deadline is based upon the plan selection. Call 408-372-PLAN find out more.|
|How to open an account||Call Index Gurus at 408-372-PLAN||Call Index Gurus at 408-372-PLAN||Call Index Gurus at 408-372-PLAN||Call Index Gurus at 408-372-PLAN||Call Index Gurus at 408-372-PLAN|
What is your objective as a Business Owner?
Before Index Gurus prepares your proposal, your objective is paramount. Do you want to maximize contribution to owners? This may come with additional expense for administration. On the other hand, if you want to minimize cost, then this will affect your contributions.
Hypothetical Illustration of Plan Type Comparisons
The SEP Plan makes sense when you start a business. As you grow, in terms of salary, income and employees, a qualified plan may provide potentially greater retirement contributions at identical income levels compared to a SEP IRA. Depending on your objective, it may allow the owner to maximize cash flow to their own plans.
What is a Defined Benefit Pension Plan (DB)?
A Defined Benefit Pension Plan (DB) is a qualified retirement plan where contributions to the plan are based on a participant’s age and compensation. While eligibility and distribution options are the same as other qualified plans, an actuary calculates how much a company must contribute to meet the ‘benefit defined’ in the plan document.
Defined Benefit/Defined Contribution Combo Plan
A Defined Benefit/Defined Contribution Combination Plan (DB/DC) offers owners a two-plan approach to saving for retirement. With the Pension Protection Act, many plans now allow owners up to 6%, and in some cases more, additional DC contribution and individual 401(k) salary deferrals of $17,500 ($23,000 if age 50). There are four variations that we can discuss based on your needs and objectives.
Example using a Floor Offset.
The Floor Offset establishes a DB Plan for owners and a DC Plan for employees. The benefits provided under the DB Plan are reduced by the value of the participant’s account in the DC Plan. The DC Plan participants receive an estimated 5 – 10% of pay contribution.
Defined Benefit Contribution
Profit Sharing Contribution
Index Gurus approach to providing retirement benefits plans to business owners from every industry is simple – a dedicated focus and unsurpassed service. It’s this approach that makes offering retirement benefits as smooth, simple and as low-maintenance as possible.
When it’s time to put your retirement plan into action, you’ll have our full support and partnership. Our experienced teams will work closely with you to help you choose the plan design, investment lineup and features that best fit your business and employees. It all adds up to a smooth implementation that can help minimize costs and administrative time, letting you introduce your employees to outstanding retirement benefits quickly and efficiently.
Exceptional fiduciary tools
Our innovative fiduciary tools helps you thoroughly understand your fiduciary responsibilities. And throughout our relationship with you, we’ll be there with the support you need to help manage your liabilities as a fiduciary, including providing a third-party offering to help further reduce your oversight responsibilities and mitigate risk.
Solid administrative support
Plan sponsors have unlimited access to our full administrative support services, including plan documents and updates as well as contribution statements, plan reports and summary annual statements. And our comprehensive technology solutions make it easier to manage your administrative role. But whenever you need it, you can count on receiving personal service from Index Gurus who is dedicated to meeting your needs.
In-person enrollment and plan support
Making sure your employees are fully engaged with your retirement plan is one of our top priorities. That’s why we offer full support from highly trained, dedicated financial professionals who provide in-person assistance to help each individual understand how and why they should participate in your plan.
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