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A 401(k) plan permits voluntary payroll deduction savings for employees. Using pre-tax dollars, employees do not pay taxes on invested money until it is withdrawn. Employees can also make post-tax contributions (Roth contributions), which can be removed from the plan tax-free under certain conditions.

A profit sharing plan is a type of defined contribution plan wherein the employer’s contribution is not required to be fixed. Often, the employer uses a discretionary formula to determine how much to contribute each year. This contribution may range from 0% to 25% of eligible compensation. Contributions are allocated based on each participant’s compensation.

Cash balance plans are defined benefit plans, but operate like defined contribution plans in certain regards. Each participant has credited to his or her “cash balance account” on an annual basis both a pay-related credit and an investment credit. The pay-related credit is a fixed dollar amount or a percentage of total wages, and the investment credit is interest credited based on a well-defined index.

• Defined contribution plan limitations are not applicable to cash balance plans (other limitations may exist). Company can sponsor both a defined contribution plan (e.g. 401[k]) and a cash balance plan.
• Cash balance plans are easier to understand than traditional defined benefits plans and usually provide the same pay-related credit rate to all non-key employees, regardless of age. If key employees are older than most of the staff, a cash balance plan can be designed to provide very significant benefits to a select group of key employees, while retaining reasonable benefits to other employees.

A cross-tested plan can use any formula to produce a set of desired benefit results. For instance, the plan may favor any participant or group of participants, providing the plan satisfies IRS discrimination testing requirements. The plan may have a required or a flexible contribution. Every employee can be in his or her own group, maximizing flexibility.

This plan type provides a retirement benefit for each participant based on a set formula(s). A contribution range is determined based on factors such as age, compensation and years of service, investment performance of plan assets, and prescribed interest rates and mortality tables. We can custom-design a defined benefit plan to accomplish your objectives while meeting your budgetary requirements.