401(k) and 403(b) Retirement Planning, and Pension Plans

401(k) and Pension Plans

We are all aware of the problems facing the Social Security System. Employees will need to provide a substantial supplement to their Social Security benefit. A 401(k) retirement plan is a popular, effective solution to this problem.

Offering your employees a retirement plan is a successful strategy to attract and retain key employees. The benefits and tax advantages of supplementing Social Security with a qualified retirement plan are significant. A qualified plan is one meeting Internal Revenue Service (IRS) specifications. Currently, such contributions are tax deductible and earnings accumulate on a tax-deferred basis. In addition, employee benefits earned are not part of the participant's taxable income until received, and certain distributions are eligible for special tax treatment.

You want to be sure that your plan is being handled by a "low cost" administrator. Unnecessarily high administration costs rob you and your employees of the opportunity to develop your retirement capital to its full potential. Other factors you want to consider include a good balance of fund choices available within the plan and an excellent communication system to help the employees understand the investment choices they have and how they work.

Retirement plans need to be designed to meet the needs of both the owners of the company and the employees. IRS rules allow a great deal of latitude in the way the plan is designed. We will review your current plan or help structure the proper design for a new plan.

403(b) Plans

A 403(b) plan is a type of retirement plan for tax-exempt organizations, most employees of public schools, and self-employed religious ministers. Many compare 403(b) plans to 401(k) plans offered by corporations and businesses to their employees.

There are many benefits to offering a 403(b) plan. It’s a great way to attract and retain employees and can be enhanced with a dollar or percentage matching program. Both the company that makes matching contributions and the employee that contributes money through regular payroll deductions can often write these 403(b) contributions off their taxes. Deposits can grow tax-deferred for decades, resulting in far more wealth for your employee. Your employees can take loans against their 403(b) when they are in emergency need of cash. These 403(b) loans must be paid back, just like their 401(k) counterparts, or there will be significant tax consequences.

Pension Plans

Whether you are a sole proprietorship, a partnership or a corporation (employing many people or only yourself as the owner/employee), there are a wide range of 401(k) and 403(b) employee benfits retirement options available. These can range from simple plans, which you establish and maintain, to complex versions, which require an actuary, attorney or employee benefits consultant. Accountants, banks, insurance and investment professionals, as well as other financial institutions, can provide information on pension plan products. A plan need not be complex or costly to establish. In fact, there are several versions that you can establish without any outside consultants.