Plan Limits

Qualified Retirement Plan Types

Qualified Plans

Qualified Plans offer a retirement program for you and your employees which are governed by Internal Revenue Service
rules and regulations. Qualified plans provide tax deductible contributions and administrative expenses, motivate employees
to take greater interest in your company's success and provide your employees with a more secure and comfortable retirement.

Profit Sharing
Profit Sharing Plans involve the sharing of company profits with employees. They are the most flexible plans with respect
to the amounts of annual contribution. Contributions are discretionary but must be "substantial and recurring". The maximum

contribution that a company makes each year is 25% of eligible compensation.
Methods in which contributions are allocated to eligible participants include:

•Compensation to total compensation.
•Permitted disparity.
•Combination of age and compensation.
•Tiered approach with "cross testing".
•Units such as years of service.

Traditional 401(k) Plan
Traditional 401(k) Plans a very popular plan with employees and employers. These plans allow for pre-tax employee contributions, with or without matching employer contributions. Roth After-tax contributions may also be allowed.  Employee contributions are limited by law to an annual limit. This limit may be increased each year by the government. The sum of all employee and employer contributions for a given participant in any year cannot exceed the lesser the annual limit or 100% of the participant's compensation.

 Safe Harbor 401(k) Plan

A safe harbor 401(k) plan is similar to a traditional 401(k) plan, but, among other things, it must provide for employer contributions that are fully vested when made. These contributions may be employer matching contributions, limited to employees who defer, or employer contributions made on behalf of all eligible employees, regardless of whether they make elective deferrals. The safe harbor 401(k) plan is not subject to the complex annual nondiscrimination tests that apply to traditional 401(k) plans.  Safe harbor 401(k) plans that do not provide any additional contributions in a year are exempted from the top-heavy rules of section 416 of the Internal Revenue Code.

Employee Stock Ownership Plan (ESOP)
ESOP's allow employees to become company stockholders through employer contributions of shares of the company stock to the retirement program. Stock bonus and stock ownership plans provide benefits similar to profit sharing plans, except that the contributions by the employer are not necessarily dependent on profits.  Stock plans can be used to increase company cash flow, as a way to finance company growth or for estate planning for the owner of a closely held corporation.

New Comparability Plan
A new comparability plan is generally a profit sharing plan in which the contribution percentage formula for one category of participants is greater than the contribution percentage formula for other categories of participants. As with an age-based
profit sharing plan, to satisfy the nondiscrimination requirements, a new comparability plan is tested under the cross-testing rules. A new comparability plan must contain a definite predetermined formula for allocating contributions made
to the plan among the participants.

 
Defined Benefit Pension Plan
A Defined Benefit Plan defines the monthly benefit amount an employee will receive at normal retirement age.  The employer is required to provide the minimum funding requirements, regardless of profitability. The annual contribution
is calculated utilizing actuarial methods. These plans often require additional government reporting.

Cash Balance Plan

A Cash Balance plan resembles a defined-benefit plan where an employee is guaranteed a certain sum of money upon retirement.  This sum is a combination of employer contributions and compound interest over time.  The employee has the option at retirement to either annuitize or takes the benefits at lump sum.  A cash balance plan works similar to a defined-benefit pension plan in that its funding limits, funding requirements, and assumption of risks are patterned after the same rules.  A key difference is that cash balance plans are maintained on an individual account basis just like 401(k) plans.

 
Secure Act, Secure Act 2.0, EGTRRA, PPA, HEART, WRERA and Plan Restatement
Secure Act, Secure Act 2.0, EGTRRA, Pension Protection Act of 2006 (PPA)   Heroes Earnings Assistance & Relief Tax Act of 2008 (HEART)   Worker Retiree & Employee Retirement Act (WRERA)
Because of these changes every retirement plan document has to be restated to meet these new Federal requirements.  Most retirement plans will need to be restated every five or six years.
The staff at Pentec continuously monitor changes like EGTRRA and update retirement plans accordingly. At Pentec, the client's needs are first and foremost.

Welfare Benefit Plans

The purpose of an employee welfare benefit plan is to provide specified benefits, through insurance or otherwise, such as:  Medical, surgical, or hospital care or benefits in the event of sickness, accident, disability, death, or unemployment.  Examples of employee welfare benefits include cafeteria plans, dental and vision benefits, dependent care, health flexible spending accounts (health FSAs), short- or long-term disability plans, and group life insurance plans.

Pentec can create a ERISA "Wrap" Document so all these plans can meet IRS 5500 filing requirements with just one annual filing.  Pentec can also help with the preparation of the Form 5500 if your company is required to file one for its Welfare Benefit Plan(s).