Analysis of Contributions/Benefit Levels

 

All employer sponsored qualified retirement plans provide a tax deduction for the employer, through credits and income reduction. In addition to this benefit to the employer, each of the supported plan types offers other benefits to both the employee and the employer.

Benefits to the Employee

The 401(k) Plan

- An eligible employee can save up to $19,500 for 2021 (indexed) per year on a pre-tax basis

- Balances are invested in a variety of mutual funds, stocks, or bonds, as directed by the participant

- May include a matching contribution from the employer

- May include a profit sharing contribution from the employer

- May include provisions for Loans and Hardship withdrawals

- May contribute an additional $6,500 'catch up' contribution if age 50 or over.

 

The Profit Sharing Plan

- All contributions are made by the Plan Sponsor for the Participating Employee

- Builds a retirement fund on a tax-deferred basis

- May include a provision for plan balances to be invested in a variety of mutual funds, stocks, or bonds, as directed by the participant

- May include provisions for Loans and Hardship withdrawals

- May be designed to favor older employees, a "class" or a group of employees

 

The Money Purchase Plan

- All contributions are made by the Plan Sponsor for the Participating Employee

- Builds a retirement fund on a tax-deferred basis

- May be designed to favor older employees, a "class" or group of employees

- May include provisions for Participant Loans

 

The Cash Balance Plan

- All contributions are made by the Plan Sponsor for the Participating Employee

- Favors older, higher paid employees and owners

- Builds a retirement fund on a tax-deferred basis

- May include provisions for Loans and Hardship withdrawals

 

The Defined Benefit Plan

- Favors older, higher paid employees and owners