Qualified Plans

Plans that are blessed by the IRS are called qualified plans and are eligible for favorable tax treatment. That means contributions (and any employer "match") are tax-deductible. Employees may contribute using pre-tax monies (when allowed by the plan), and earnings on investments accumulate tax-free until withdrawn at retirement (disability or death). Plan types include:

  • Defined Benefit: pension plan.
  • Defined Contribution: 401(k), cross-tested, new comparability, profit sharing, money purchase, age weighted, tiered, target benefit, money purchase, super-integrated and others.

Designing the appropriate type of retirement plan takes many factors into consideration, including:

  • The business owner's goals for the plan.
  • The size of the business.
  • The age of the owners and key employees.
  • The number of employees.
  • The amount of money owners can contribute on an annual basis.
  • Who the business wants to benefit with the plan, and many other factors.

Retirement plans can also be "integrated" with Social Security. This means that the plan can take into account what the participant will receive in benefits from Social Security and offset those benefits. This allows a somewhat larger benefit for more highly paid employees.

For more information, contact CMC.

If you would like to read more about why a retirement plan makes sense for you and your company, please click here.



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Cathy Green, CPC, ERPA   Cathyg@CMCPenPro.com

Mike Bain, ASA, EA, MSPA     Mikeb@CMCPenPro.com




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