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Plan Comparisons

2018 Qualified Plan Comparisons

Profit Sharing 401(k) Profit Sharing 401(k) - EZ Defined Benefit
Plan Description A profit sharing plan is a flexible and popular plan option. The combination of profit sharing and vesting rewards long-term employees enhancing employee satisfaction. A 401(k) plan is simply a profit sharing plan that allows contributions from employees. Employees contribute to the plan by making salary reductions from their paychecks. A 401(k) –EZ is a 401(k) plan designed for a company with only an owner employee (plus spouse). A defined benefit plan is a true “pension plan” that provides the greatest ability to design larger contributions to favor older or highly paid employees.
Who Can Adopt? ~Corporations
~Sole Props
~LLCs
~Partnerships
~Non-Profits
~Corporations
~Sole Props
~LLCs
~Partnerships
~Non-Profits
Owner Only Company
~Corporations
~Sole Props
~LLCs
~Partnerships
~Non-Profits
~Corporations
~Sole Props
~LLCs
~Partnerships
~Non-Profits
Who Is Eligible? Range from immediate to maximum of 2 years of service (immediate vesting) and age 21. May require 1,000 hours of service. Range from immediate eligibility to maximum of 1 year of service and age 21. May require 1,000 hours of service. Immediate Range from immediate to maximum of 2 years of service (immediate vesting) and age 21. May require 1,000 hours of service.
When Must Plan Be Established? By the fiscal year end (12/31 - calendar year) By the fiscal year end (12/31 for calendar year) By the fiscal year end (12/31 - calendar year) By the fiscal year end (12/31 - calendar year)
Employee Contributions No Employee Contributions 2018 Limit $18,500
Catch Up Limit $6,000 (for age 50
or older)
2018 Limit $18,500
Catch Up Limit $6,000 (for age 50 or older)
No Employee Contributions
Employer Contributions 25% of pay for all eligible participants. Limited to lesser of $55,000 or 100% of pay per participant (2018) 25% of pay for all eligible participants. Limited to lesser of $55,000 or 100% of pay per participant (not including Catch up) (2018) 25% of pay for all eligible participants. Limited to lesser of $55,000 or 100% of pay per participant (not including Catch up) (2018) Variable based on actuarial assumptions and factors such as:
- age
- compensation
- benefit formula
What Are the Advantages? ~Discretionary & flexible contributions

~4 design options:
  Pro-rata: same percent to all eligibles
  Integrated: higher wage earners receive higher percent of pay
  Age-based: higher wage earners and older employees receive higher contribution
  Cross tested: groups of employees can receive different amounts of contributions
401(k)s are popular with employees because they provide an efficient tax advantaged way to save for retirement. They are excellent employee benefit tools as a way to attract and retain employees. Any of the 4 profit sharing allocation methods can be used in a 401(k) plan.
Safe Harbor options to avoid discrimination testing are:
  Match of 100% on the first 3% plus 50% of the next 2%; or
  Profit Sharing of 3% to all eligible employees.
Both options are 100% vested.
~Generous contributions limits compared to compensation
~Flexibility
~Simplified and lower cost administration
A Defined Benefit Plan often allows larger contributions than other types of plans.

They are excellent vehicles for increased retirement savings and tax planning strategies.
What options are available? ~Loans
~Vesting schedule
~Any size group
~Trustee or participant directed investments
~Participant bears investment risk
~Loans
~Vesting schedule
~Any size group
~Trustee or participant directed investments
~Matching available
~Participant bears investment risk
~Loans
~Vesting schedule
~Owner only group
~Trustee or participant directed investments
~Participant bears investment risk
~Loans
~Vesting schedule
~Any size group
~Trustee directed investments
~Company bears investment risk