Qualified Retirement Plans
A qualified retirement plan must meet a certain set of requirements set forth in the Internal Revenue Code such as minimum coverage, participation, vesting and funding requirements. In return, the IRS provides tax advantages to encourage businesses to establish retirement plans including:
- Employer contributions to the plan are tax deductible.
- Earnings on investments accumulate tax-deferred, allowing contributions and earnings to compound at a faster rate.
- Employees are not taxed on the contributions and earnings until they receive the funds.
- Employees may make pretax contributions to certain types of plans.
- Ongoing plan expenses are tax deductible.
In addition, sponsoring a qualified retirement plan offers the following advantages:
- Attract experienced employees in a very competitive job market: Retirement plans have become a key part of the total compensation package.
- Retain and motivate good employees: You don’t want to lose them to your competitors because of the qualified plans they are offering.
- Help employees save for their future since Social Security retirement benefits alone will be an inadequate source to support a reasonable lifestyle for most retirees.
- Qualified plan assets are protected from creditors of the employer and employee.
Employers can choose between two basic types of retirement plans: defined contribution and defined benefit. Both a defined contribution and a defined benefit plan may be sponsored to maximize benefits. Our consultants can help you choose the right plan for your company. Listed below is a description of the types of plans that are available.