Introduction Of Pension Plans

1
The Storick Group
Built on a simple idea and a belief for business
owners.
The idea was to make 401k and pension plans
available to plan sponsors and their employees
regardless of the size of the company or the
amount of assets in the plan. We worked on the
idea that bringing dedicated administration
professionals together would create a solid and
viable firm and a belief that hard work and a
strong service orientation would be a catalyst
for growth. Today we administer more than 300
qualified retirement plans for all types of
entities in various industries. When you make
the decision to move forward we work with you and
the plan administrator to design a plan that fits
the needs of you and your employees and complies
with all applicable regulations. We help you
choose the eligibility, vesting, and safe harbor
provisions that will work best for your company.
We look forward to meeting with you and building
a future together.
2
LOW FEE 401K AND PENSION PLANS

• Safe Harbor 401k Plans
• Profit Sharing Contributions
• Traditional 401(k) Plan
• Roth 401(k) Plan
• Defined-benefit Plans
• Cash Balance Plans

3
Safe Harbor 401k Plans

• A Safe Harbor 401(k) Plan is a relatively new
  type of 401(k) Plan that automatically meets
  certain IRS non-discrimination requirements,
  unlike a traditional 401(k) plan, if the employer
  commits to making one of two types of employer
  contributions. The first is a 3 of pay
  non-elective (profit sharing) contribution
  required to be made on behalf of any participant
  who has met the eligibility requirements for
  salary deferral contributions,whether or not the
  participant actually participates in the salary
  deferral arrangement.The second type of
  contribution is an employer matching contribution
  whose formula,in the aggregate, may not be less
  than 100 on the first 3 of a participants pay
  deferred to the plan and 50 on the next 2 of a
  participants pay deferred to the plan.A
  participant must actually participate in the
  salary deferral arrangement to be eligible for
  the employer matching contribution.
• The employers chosen Safe Harbor contribution
  must be 100 vested when made for each
  participant, but there are certain withdrawal
  restrictions that apply to these types of
  contributions resembling those that apply to
  salary deferral contributions

4
Taxation
Profit Sharing Contributions

• Under a qualified plan, the employer gets a tax
  deduction when the contributions are made to the
  plan
• The employee is not taxed on the contributions
• The investment income on the assets in the plan
  is not taxed
• The employee is taxed on benefits when they are
  received
• The tax break is the lag between the deduction
  for the employer and the taxation for the
  employee several (or many) years later

An employer profit sharing contribution is a
contribution made by the employer to an employer
sponsored qualified retirement plan. Eligible
participants share in this contribution based on
a predetermined formula used to allocate this
contribution amount. The plan need not be a
401(k) plan, but if it is a plan participant need
not enter into a salary deferral arrangement to
receive such a contribution. However, there may
be other requirements that an employee must
satisfy such as being employed on the last day of
the plan year or having worked at least 1,000
hours during the plan year. This type of
contribution is typically subject to a vesting
schedule.
5
Management Objectives in Pension Plan Design
Traditional 401(k) Plan

• Help employees with retirement saving
• Tax deferral for owners and highly compensated
  employees
• Help recruit, retain and retire employees
• Encourage productivity directly
• Discourage collective bargaining

With this type of Plan, an employee can defer a
portion of their salary into the plan. Their
funds are set aside by the employer in a special
account where the funds are then invested into
various investment options. The contributed
monies grow tax-deferred meaning that the
employee does not pay any taxes on the earnings
each year until the contributions are
distributed. All amounts distributed,
contributions and accumulated earnings are
taxable. Withdrawals prior to the age of 59 1/2
are subject to excise taxes, but the employee
must begin minimum distributions from the plan
following April 1st latter of the calendar year
in which he/she reaches the age of 70 1/2. Most
employees are allowed to place up to the maximum
contribution limit into their 401(k), and some
employers provide matching contributions.
6
Governments Role
Roth 401(k) Plan

• Set rules for favorable tax treatment
• Tax revenue loss issue
• Discrimination in favor of HCEs
• Encouraging private saving

With this type of Plan, an employee can pay taxes
upon receiving their income now to grow their
retirement funds and NOT pay taxes in the future.
Their funds are set aside by the employer in a
special account where the funds are then invested
into various investment options. The dollar or
percentage amount contributed to the ROTH 401k
grows tax-deferred meaning that the employee
pays any taxes on the earnings each year until
the contributions are distributed. All amounts
distributed upon withdrawal in retirement,
contributions and accumulated earnings are not
taxable. Withdrawals prior to the age of 59 1/2
are subject to excise taxes, but the employee
must begin minimum distributions from the plan
following April 1st latter of the calendar year
in which he/she reaches the age of 70 1/2. Most
employees are allowed to place up to the maximum
contribution limit into their 401(k), and some
employers provide matching contributions.
7
Qualified Plan Characteristics
Defined-benefit Plans

• Eligibility (Chapter 19)
• Minimum age cannot be over 21
• Service requirement cannot be more than 1
• Must cover at least 70 of non-HCEs
• Nondiscrimination in benefits and contributions
  (Chapter 20)
• Funding requirements
• Vesting requirements (Chapter 21)

Defined-benefit plans provide pension income to
retired employees on the basis of a formula that
accounts for the employees years of service
earnings. Contributions are usually made by the
employer and are tax-deferred, which means that
neither the employer nor the employee pays tax on
the contributions nor accumulated earnings. These
type of plans are designed to pay a fixed,
pre-established benefit upon retirement and
generally pays a regular monthly lifetime
benefit. In some cases, employees are able to
choose a lump-sum payment upon retirement which
can be reinvested. This benefit may also include
a cost-of-living increase each year during
retirement. The monthly benefit amount is based
upon the employees wages and length of service.
8
Qualified Plan Characteristics - (cont.)
Cash Balance Plans

• Limitations on benefits and contributions
  (Chapter 25)
• Pension limited to 90,000 (indexed)
• Contributions limited to 30,000
• Benefits limited to first 150,000 (indexed) of
  compensation
• Payout restrictions
• Tax penalty (10) for withdrawal of funds before
  age 59 1/2 , unless for death or disability
• Top-heavy rules

A Cash Balance Plan operates much differently
than other retirement plans. Most are designed to
benefit the owners or executives of a company.
The contributions for owners and executives are
typically very large with a smaller contribution
provided to staff to meet IRS requirements.
During the plan design, the sponsoring company
selects the amount of contribution for each owner
and executive, up to the maximum amount permitted
by law.
9
The Storick Group
Built on a simple idea and a belief for business
owners.
Our talents and skills lie in the design and
administration of our team. Our team has over 25
years of experience in third party services for
groups of all sizes. We understand the everyday
issues facing businesses and are familiar with
corporate and personal tax planning concepts. The
ability to see the big picture enables us to
design your retirement plan to ensure that it
initially meets the organization and employee
needs, and that it continues to meet these needs.
Meeting these needs, demands that we continue to
evolve as new technology is developed, as new
qualified retirement plan law is enacted or the
old repealed and as the marketplace creates new
products and services.