This chapter provides an overview of designing retirement plans. Three general steps are discussed: gather the relevant facts, identify employer goals and objectives, and choose plan features that promote the employer objectives. Employer advantages are discussed, such as helping employees with retirement saving, tax deferral for owners and highly compensated employees, helping to recruit, reward, retain, and retire employees, encourage productivity, and discourage collective bargaining. | Gather relevant facts Identify employer goals and objectives Select plan features that meet objectives Initial steps: Copyright 2009, The National Underwriter Company Help employees with retirement savings Tax deferral for owners and highly compensated employees Help recruit, reward, retain, and retire employees Encourage productivity Discourage collective bargaining Advantages for the employer: Copyright 2009, The National Underwriter Company Employers may use qualified or nonqualified plans to meet their planning objectives Qualified plans – enjoy tax advantages but must meet strict IRS rules to ‘qualify’ for those advantages Nonqualified plans – allow employers more flexibility in plan design, but offer far fewer tax advantages than qualified plans Copyright 2009, The National Underwriter Company do not have to be duplicated among rank and file employees can exceed the dollar limits imposed under qualified plans can be custom tailored to meet needs of select executives or key employees A nonqualified plan allows an employer to provide benefits for key employees that Copyright 2009, The National Underwriter Company With a nonqualified plan, an employer can: Recruit a key employee when matching or exceeding benefits of their current employer would make offered benefits exceed benefit levels given other employees Reward the individual or group that makes a substantial contribution to the success of the business Enable a business owner to use company earnings in ways that reduce or defer taxes and accumulate wealth Copyright 2009, The National Underwriter Company Tax Advantages of Qualified Plans Plan contributions (employer contributions and employee salary reduction contributions) - tax deductible for employer - tax deferred for employee Earnings on plan investments accumulate tax deferred Some lump sum distributions may qualify for 10 year averaging Copyright 2009, The National Underwriter Company Types of Qualified Plans Defined . | Gather relevant facts Identify employer goals and objectives Select plan features that meet objectives Initial steps: Copyright 2009, The National Underwriter Company Help employees with retirement savings Tax deferral for owners and highly compensated employees Help recruit, reward, retain, and retire employees Encourage productivity Discourage collective bargaining Advantages for the employer: Copyright 2009, The National Underwriter Company Employers may use qualified or nonqualified plans to meet their planning objectives Qualified plans – enjoy tax advantages but must meet strict IRS rules to ‘qualify’ for those advantages Nonqualified plans – allow employers more flexibility in plan design, but offer far fewer tax advantages than qualified plans Copyright 2009, The National Underwriter Company do not have to be duplicated among rank and file employees can exceed the dollar limits imposed under qualified plans can be custom tailored to meet needs of select executives
