Choice of Plan Design
Retirement Gateway® from Equitable can support a variety of plan types. A Retirement Program Specialist and Plan Design Specialists, in consultation with personal business advisors, will help employers determine the best plan type for their business, based on the number and age of their employees, their retirement goals, and other individual criteria of importance to them.
Through Equitable, employers have access to plan documents for virtually all defined contribution plans. Equitable can assist them in developing customized plan design recommendations based on unique situations and employee demographics, as well as business objectives. We can prepare illustrations that will demonstrate the impact of different plan designs on contribution amounts so that an employer can judge which will be most beneficial to their business.
All plans offer the following benefits:
- Tax savings for both employer and employee contributions.
- Tax deferral of any earnings.
Withdrawals from qualified retirement plans are subject to normal income tax treatment and if taken prior to age 59½ may be subject to an additional 10% federal income tax penalty.
The key differences among plan types are discussed briefly, below.
Designed for any size company, a 401(k) plan can be sponsored in conjunction with a Profit-Sharing plan.
- Ability to restrict participation of part-time workers.
- Most employer contributions can include a vesting schedule.
- Ability to designate post-tax salary deferral contributions as Roth deferrals with tax-free distribution opportunity.
Safe Harbor 401(k) Plans enable highly compensated employees to save more for retirement, while automatically satisfying non-discrimination testing. Employer contributions are required and are subject to vesting.
Profit-Sharing Plans can be established as stand-alone plans or in conjunction with 401(k) plans. The employer can decide whether and how much to contribute annually. There are no employee contributions in a stand-alone Profit-Sharing plan.
Suitable for businesses that wish to enable key employees to save more for retirement, particularly those who have difficulty meeting non-discrimination requirements of standard Profit-Sharing or 401(k) plans.
- In Age-Weighted plans, contributions for older workers may be considerably higher than those for younger employees.
- New Comparability plans permit companies to categorize employees by several criteria, including ownership, tenure, and job function. Each category may then receive a different contribution percentage.
Going forward with Retirement Gateway employers will also get expert plan document and compliance services to alleviate concerns about meeting their compliance obligations.
This is not intended as legal or tax advice. Tax information is meant to support the promotion of the matters addressed and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. Employers should seek advice based on their particular circumstances from an independent tax advisor.