401(k), retirement plans

Choose from several plans designed specifically for businesses with one or more employees. Plans allow employees to postpone receiving a portion of their salary until retirement and allow employers to offer contributions as part of compensation.

Simplified Employee Pension Plan ("SEP")

A SEP is a Simplified Employee Pension plan. A SEP plan provides employers with a simplified method to make contributions toward their employees' retirement and, if self-employed, their own retirement. Employers make contributions to traditional Individual Retirement Arrangements (SEP-IRAs) set up for employees (including self-employed individuals), subject to certain limits. A SEP is funded solely by employer contributions. Each employee is always 100% vested in (or has ownership of) all money in his or her SEP-IRA.

There are no business size requirements and generally, the business owner does not have any other retirement plan (except for another SEP).

Features:

  • Low administrative costs.
  • Eligible Employees must meet the following requirements: Attained age 21; has worked for the employer in at least 3 of the last 5 years; has received at least $500 (subject to annual cost-of-living adjustments) in compensation from the employer for the year.
  • The employer may choose to use less restrictive requirements to determine eligible employees.
  • Contribution Requirements - Annual contributions an employer makes to an employee's SEP-IRA cannot exceed the lesser of: 25% of compensation, or a dollar limit adjusted annually for cost-of-living increases.
  • Most SEPs require that allocations to all employees' SEP-IRAs be proportional to their salary/wages.
  • IRA Product Offerings: A traditional IRA product, SEP-IRA, is opened for each employee involved in the plan:
    • IRA Money Market Account - Variable rate savings account.
    • IRA Certificate - Fixed terms from 1 to 5 years; rate fixed for term of IRA.
    • An alternative investment option available through Virginia Asset Group.
  • When To Set Up Plan: A SEP can be set up for a year as late as the due date (including extensions) of the business's income tax return for that year.
  • Deductibility: The most that may be deducted on the business' tax return for contributions to its employees' SEP-IRAs is the lesser of its contributions or 25% of compensation.
  • Participant loans are not allowed.
  • Early withdrawal penalties may apply.

*Please consult accountant or tax advisor for personal tax related questions and advice.

Savings Incentive Match Plan for Employees

Under a SIMPLE IRA plan, Business owners, with 100 or fewer employees, is ideally suited as a start-up retirement savings plan for small employers who do not currently sponsor a retirement plan. A SIMPLE IRA Plan is funded both by employer and employee salary reduction (tax deferred) contributions. Each employee is always 100% vested in (or has ownership of) all money in his or her SIMPLE IRA.

Features:

  • SIMPLE IRAs are attractive to clients as no annual financial reporting is required and administrative costs are low.
  • Eligible Employees: Must have received at least $5,000 in compensation during any 2 years preceding the current calendar year and are expected to receive at least $5,000 during the current calendar year. Cannot be required to attain a certain age or earn a certain number of hours of service to become eligible.
  • Contribution Requirements: 2% Nonelective Contribution: Each eligible employee must receive a contribution equal to 2% of compensation regardless of whether the employee makes a contribution. Dollar-for-Dollar Match Up to 3% of Pay: Only the eligible employees who have elected to make salary reduction (tax deferred) contributions will receive the employer's matching contribution.
  • IRA Product Offerings:
  • A traditional IRA product, SIMPLE IRA, is opened for each employee involved in the plan:
    • IRA Money Market Account - Variable rate savings account.
    • IRA Certificate - Fixed terms from 1 to 5 years; rate fixed for term of IRA.
    • An alternative investment option available through Virginia Asset Group.
  • When To Set Up Plan: Any time between 1/1 and 10/1 of the calendar year. For new employers coming into existence after 10/1, then as soon as administratively possible.
  • Deductibility: Contributions to a SIMPLE IRA plan are deductible for the employer in the tax year containing the end of the calendar year for which the contributions were made. Employees' salary reduction contributions are excluded from their gross income.
  • Early withdrawal penalties may apply.

*Please consult accountant or tax advisor for personal tax related questions and advice.

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