Types of Retirement Plans

Our Retirement Plans section provides an in-depth look into each retirement plan option:

Defined Contribution Plans

Defined Contribution Plans define the contribution a participant receives under the plan. The employer contributions are allocated to individual accounts maintained for each participant within the plan. Each participant bears the investment risk in this plan.

Traditional 401(k) Plans Profit Sharing Plans 403(b) Plan 401(k) Safe Harbor Plans Cross-tested / New Comparability
What is it? A 401(k) plan which enables employees to make contributions to the plan before taxes or after-tax (Roth) Profit Sharing Plans enable an employer to make discretionary contributions in a way that is tailored to the individual organization’s objectives 403(b) plans are sponsored by not-for-profit and educational institutions and operate in an almost identical manner to 401(k) plans. They have some unique features that make them very attractive to qualifying organizations A 401(k) Safe Harbor Plan is similar to the traditional 401(k) plan. The employer is required to make a fully vested matching or employer safe harbor contribution A Cross-Tested/New Comparability Plan is a type of profit sharing plan which allows the employer to maximize the contribution to selected employees while having the plan remain in compliance with IRS regulations
Why is it used? Employers who want to offer a retirement plan that allows employees to contribute part of their salary into the plan. Most of the time it is paired with an Employer matching contribution Generally, when an Employer wants to provide a level contribution percentage to each eligible employee If you are a qualifying institution and the plan is properly structured you are automatically exempt from the non-discrimination testing associated with employee contributions For companies that want to avoid failing non-discrimination testing. A failure may require a refund of salary deferrals to the firm’s most valuable employees. Companies want to avoid disappointing these employees Often paired with a 401(k) feature this allocation methodology provides the best opportunity to maximize contributions to the management team. It further provides cost effective contributions to the staff

Defined Benefits Plans

A Defined Benefit Plan is an employer-funded retirement plan where employee benefits are computed using a formula based on various factors. They serve to define the retirement benefit that is ultimately paid to the participant.

Traditional Defined Benefit Plan

A Traditional Defined Benefit Plan promises to pay a specified benefit at a future retirement date to eligible participants.

Cash Balance Plan

A Cash Balance Plan creates a hypothetical account balances similar to what you see in a 401(k) plan. More understandable than a traditional defined benefit plan and the fastest growing retirement plan in the country.

Combo Plans

Combo plans combine a profit sharing/401(k) plan with a cash balance plan. This strategy maximizes contributions to key personnel while simultaneously maximizing their share of the company’s total retirement plan contributions. Combo Plan designs work extremely well for smaller professional service firms where the goal is to save much more for retirement and reduce your current income taxes. They are a perfect fit for successful businesses with a proven track record of solid earnings.