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Understanding Retirement Plan Alternatives for Small Businesses

Understanding Retirement Plan Alternatives for Small Businesses. Presented by: Mark M. Gutrich President & CEO ePlan Services, Inc. What Are The Basic Options?. Simplified Employee Pensions (SEP) Any small business with/without employees Savings Incentive Match Plan (SIMPLE)

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Understanding Retirement Plan Alternatives for Small Businesses

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  1. UnderstandingRetirement Plan AlternativesforSmall Businesses Presented by: Mark M. Gutrich President & CEO ePlan Services, Inc.

  2. What Are The Basic Options? • Simplified Employee Pensions (SEP) • Any small business with/without employees • Savings Incentive Match Plan (SIMPLE) • Any employer with less than 100 employees • Profit Sharing/401(k) Plan • Any size company, including sole proprietors • Safe Harbor 401(k) Plan • Any size company, typically less than 100 employees - 1 -

  3. What is a SEP? Basics Pros & Cons PROS: Easy to Set-Up & Maintain No Mandatory Contributions No Discrimination Testing No Annual Tax Filings CONS: Must Include ALL Employees Same Contributions for ALL 100% Employer Funded 100% Employee Owned • IRS Form 5305-SEP • Minimum Eligibility (Fixed): • 21 Years of Age • Earned $450 in current year • Employed 3 of 5 Years • Maximum Contribution: • 25% of Compensation • Up to $46,000/year • No employee deferrals - 2 -

  4. What is SIMPLE? Basics Pros & Cons PROS: Easy to Set-Up & Maintain No Discrimination Testing No Annual Tax Filings CONS: Must Include ALL Employees Low Elective Deferral Rates Mandatory ER Contributions Cannot Make Addtn’lContrib 100% Immediately Vested • IRS Form 5305-SIMPLE • Minimum Eligibility (Fixed): • Earned $5,000 in any 2 past yrs • Likely to Earn $5,000 current yr • Mandatory Contributions: • 2% of Annual Compensation • OR – • 3% Match on Deferrals • Elective Deferrals: • 100% of Compensation • Up to $10,500/year - 3 -

  5. What is a Profit Sharing/401k? Basics Pros & Cons PROS: Easy to Set-Up & Administer No Mandatory Contributions Permitted Disparity Designs Optional Vesting Schedules Optional ROTH Contributions Optional Loan Feature CONS: Annual Tax Filings Annual Administration Fees Annual Discrimination Tests • Plan Adoption Agreement • Flexible Eligibility: • 18 to 21 Years of Age • Worked 1,000 hours/year • Optional Contributions: • Deferral Matching • Profit Sharing • Elective Deferrals: • 100% of Compensation • Up to $15,500/year - 4 -

  6. What is a Safe Harbor 401k? Basics Pros & Cons PROS: Easy to Set-Up & Administer No Discrimination Testing Optional Profit Sharing Optional Vesting Schedules* Optional ROTH Contributions Optional Loan Feature CONS: Annual Tax Filings Annual Administration Fees Mandatory ER Contributions • Plan Adoption Agreement • Flexible Eligibility: • 18 to 21 Years of Age • Worked 1,000 hours/year • Mandatory Contributions: • 3% of Annual Compensation • OR – • 3.5% to 4% Match on Deferrals • Elective Deferrals: • 100% of Compensation • Up to $15,500/year - 5 -

  7. How Do They Compare? *Includes Non-Elective Employer Contribution Amounts - 6 -

  8. How Do They Differ? - 7 -

  9. SEP v.PS/401(k) SEP Solo(k) Low Administrative Fees No Annual Tax Filings No Discrimination Testing Max Contrib = Lesser of: 100% Compensation Up to $46,000 May Exclude Employees Vesting Schedules Available Optional ROTH Contributions Optional Loan Feature • No Administrative Fees • No Annual Tax Filings • No Discrimination Testing • Max Contrib = Lesser of: • 25% Compensation • Up to $46,000 • Must Include ALL Employees • Including Part-Timers • No ROTH Contributions • No Pre-Retirement Access - 8 -

  10. SIMPLE v. SH401k SIMPLE Safe Harbor 401(k) Low Administrative Fees Easy Annual Tax Filings No Discrimination Testing May Exclude Employees Max Personal Deferral: 100% Compensation Up to $15,500 Mandatory Contributions: 3% of Annual Compensation OR - 3.5% to 5% Match on Deferrals Up to 2 yr Vesting Schedule* • No Administrative Fees • No Annual Tax Filings • No Discrimination Testing • Must Include ALL Employees • Max Personal Deferral: • 100% Compensation • Up to $10,500 • Mandatory Contributions: • 2% of Annual Compensation • OR – • 3% Match on Deferrals • 100% Immediately Vested - 9 -

  11. How Do I Choose? • SEP Willing to fund entire plan, without employee help • SIMPLE Willing to unconditionally give employees money/yr • Traditional 401k Not sure if you can afford to make contributions/yr • Safe Harbor 401(k) Willing to conditionally offer employees money/yr - 10 -

  12. Questions & Answers

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