Retirement Plan Features Comparison
Choosing the right retirement plan may be one of the most important business decisions you make. Ensuring that you select a plan that is affordable, administratively feasible and compatible with your business objectives, is your challenge. Helping you ask the right questions and get the right answers is ours.

Once you know the basics of the different retirement plan options and have narrowed down your choices, you may wish to review the most likely choices with your tax advisor for his or her professional recommendation.

The chart inside provides a simplified, general comparison of some of the important features of the most popular retirement plans: including simplified employee pension (SEP), 401 (k), profit sharing, money purchase pension and the new SIMPLE IRA plan.

But first, here are some questions to ask yourself before examining the detailed plan comparison chart below.
· Am I establishing a plan to maximize personal contributions, to retain, attract or motivate quality employees, to fulfill an employment promise, etc.?
· Are revenues steady, or run in cycles of high and low cash flow?
· What costs in dollars and administrative time is my company willing to absorb? Let us help you interpret the following information, and assist you in setting up the plan that's right for your business.
Setup and Funding Contribution Limit Deduction Limit Salary Deferral Feature Key Plan Benefits
Simplified Employee Pension Plan (SEP) You have until your tax return due date plus extensions to establish and fund a SEP. Contributions for each eligible employee may not exceed 15% of each individual's compensation or $24,000 (for 1997), whichever is less. The employer's deduction limit for contributions made to each eligible participant's IRA may not exceed 15% of each eligible participant's compensation. This feature is only available to employers with 25 or fewer eligible employees. At least 50% of the eligible employees must participate. (Salary deferral SEP plans may not be established after December 31, 1996.)
  • Administrative ease
  • No government reporting
  • Less restrictive of who participates
  • Need not fund each year or at a specific level
Simple IRA Plan
A similar plan--the Simple 401(k) plan--has provisions that have similarities to the Simple IRA plan, but differ in various respects		 The plan must be established prior to beginning employee deferrals (which may only be made prospectively). The employer will match employee deferrals or provide a non-elective contribution to all eligible employees. The annual deferral limit is $6,000. The employer must generally choose either to match employee deferrals up to 3% of compensation, or to make a 2% non-elective contribution to all eligible employees. The employer's deduction limit is the same as the contribution limit. Deferrals are a flat dollar amount or a percent of compensation, to a maximum of $6,000 (to be indexed) per year.
  • Administrative ease
  • No government reporting
  • Avoids complicated nondiscrimination testing and top-heavy requirements
  • Does not limit eligibility or employee access to funds
401(k) Plan The plan must be established prior to beginning employee deferrals. Matching or other contributions of the employer may be made at any time before the employer's tax return due date plus extensions. Contributions (employer and employee) plus any forfeitures allocated to a participant's account for the plan year may not exceed 25% of compensation or $30,000, whichever is less. The employer's deduction is limited to 15% of compensation paid to eligible participants for the year. Deferrals are a flat dollar amount or a percent of compensation, to a maximum of $9,500 (to be indexed) per year. (May be restricted for highly compensated employees.)
  • Highly visible employee benefit
  • Flexible funding
  • Allows restricted coverage
  • Allows control over when the money will be withdrawn
Profit Sharing Plan You have until the end of your tax year to establish a profit sharing plan and until your tax return due date plus extensions to fund the plan. Flexible contributions are decided each year. Contributions (employer and employee) plus any forfeitures allocated to a participant's account for the plan year may not exceed 25% of compensation or $30,000, whichever is less. The employer's deduction is limited to 15% of compensation paid to all eligible participants for the year. Available through a 401(k) component of a profit sharing plan.
  • Flexible funding
  • Suited to irregular profit patterns
  • Allows restricted coverage
  • Allows control over when the money will be withdrawn
Money Purchase Pension Plan You have until the end of your tax year to establish a money purchase pension plan and until your tax return due date plus extensions to fund the plan. Fixed contributions are required each year. Contributions (employer and employee) plus any forfeitures allocated to a participant's account for the plan year may not exceed 25% of compensation or $30,000, whichever is less. The employer's deduction may not exceed 25% of compensation paid to all eligible participants for the year. The contribution percentage is specified by the employer when the plan is adopted. Not available.
  • Maximum possible contributions
  • For those who find fixed contributions acceptable
  • Allows restricted coverage
  • Allows control over when the money will be withdrawn
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