R. P. Mills Associates . . . offering access to every type of retirement and benefit plan available, specializing in custom plans to meet your individual needs!
401(k) Plan: “401(k)” refers to a section of the Internal Revenue Code that allows an employee to defer the receipt of, and current taxation on, a portion of current salary by contributing it to a qualified plan—a 401(k) plan. Each participant may elect to have a portion of his/her current pay placed into an account established under the plan, and that amount will grow on a tax-deferred basis. Some 401(k) plans offer a matching employer contribution but it is not required. An employer may also make a discretionary contribution.
Age-Weighted Profit Sharing Plan: This plan allows for employer discretionary contributions that are allocated to participants based on their age and compensation. This means that the closer a participant is to normal retirement age, the more contribution the participant will receive compared to a younger participant with the same amount of compensation.
Cafeteria Plan: This welfare benefit plan permits employees to pay for their out-of-pocket group insurance premiums, unreimbursed medical/dental expenses not covered by insurance, and dependent day care expenses through pre-tax (deferred) dollars.
Comparability Plan: This plan allows for discretionary contributions to be split among different groups of employees and then allocated among the participants within each group. The plan is then “cross tested” (tested as a defined benefit plan) using the age of each participant in each group, which in many instances provides a higher benefit to participants in one of the selected groups. This plan can be designed to favor the highly compensated employees—depending on the ages of the nonhighly compensated employees.
Defined Benefit Plan: This is a retirement plan in which benefits are definitely determinable and are usually related to an employee’s service and/or pay. This type of pension plan is not an individual account plan, so the employer bears the cost of investment results. The contributions are based on the amount needed at retirement to provide the promised benefit. This plan is more beneficial to older employees because the contributions are determined actuarially, and benefits are guaranteed (subject to the Pension Benefit Guarantee Corporation).
Employee Stock Ownership Plan: This is a special type of a stock bonus plan designed to invest primarily in qualifying employer securities by borrowing from, or on the credit of, the company or its shareholders. The plan is either leveraged (plan borrows funds to purchase company shares) or nonleveraged (company makes annual stock contributions to the plan, and there is no outstanding indebtedness).
Money Purchase Pension Plan: This plan is an individual account plan that must have a fixed contribution formula not based on profits. The contribution formula is typically based on a certain percentage of a participant’s compensation (i.e., 10% of compensation).
Nonqualified Benefit Plan: In a nonqualified plan, there are fewer restrictions on provisions such as which employees will participate (may include only key employees). Tax deductions may not be taken until the employee receives the future benefit. These Plans include: Supplemental Executive Retirement Plans, Deferred Compensation Agreements, Stock Plans, Stock Option Plans, Stock Appreciation Rights.
Profit-Sharing Plan: A profit sharing plan is an individual account plan where benefits are dependent upon the contribution, income, expenses, and forfeitures of the plan. The plan is established and maintained by the employer to provide for employee participation in the profits. A profit is not required for an employer to contribute, and the contributions are normally discretionary.
Stock Bonus Plan: This is an individual account plan established and maintained by an employer to provide benefits similar to those of a profit sharing plan. The purpose is for allocating and distributing employer stock that is to be shared among the employees. Current investments in employer securities are permitted but not required (employer securities may only be required when needed for a distribution).
Target Benefit Plan: This type of plan is a cross between a defined benefit plan and a money purchase pension plan. It is similar to a defined benefit plan in that the annual contribution is determined by the amount needed to accumulate a fund sufficient to pay a projected retirement benefit (the target benefit). It is similar to a money purchase pension plan in that a contribution is required each year, and it is placed in an individual participant account where it receives the plan’s investment results.
Thrift and Savings Plan: This is generally a profit sharing plan in which the employee is required to contribute “after-tax dollars” in order to participate in the plan (participation is voluntary).
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