Types of Plans

A qualified 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.

Under a defined contribution plan, the contribution that the company will make to the plan and how the contribution will be allocated among the eligible employees is defined. Individual account balances are maintained for each employee.

More and more employees view 401(k) plans as a valuable benefit which has made them the most popular type of retirement plan today. Employees can benefit from a 401(k) plan even if the employer makes no contribution. 

Generally the most flexible qualified plan that is available. Company contributions to a profit sharing plan are usually made on a discretionary basis. Each year the employer decides the amount, if any, to be contributed to the plan.

Instead of accumulating contributions and earnings in an individual account like defined contribution plans (profit sharing or 401(k)), a defined benefit plan promises the employee a specific monthly benefit payable at the retirement age specified in the plan.

A cash balance plan is a type of defined benefit plan that resembles a defined contribution plan. For this reason, these plans are referred to as hybrid plans. Employees appreciate this design because they can see their “accounts” grow,

Our staff has the knowledge and expertise to help keep your retirement plan in compliance with federal laws and regulations and, should violations occur, provide you with methods of correction. 

Profit sharing plans may also use an age-weighted allocation formula that takes into account each employee’s age and compensation.