Below are the plans currently available.
401(k) - Qualified
A form of profit sharing plan that allows employee salary deferrals.
Eligibility - Plans can be designed to require up to one year of service and attainment of age 21.
Employer contributions are discretionary unless a safe harbor election is made.
Safe Harbor - A safe harbor plan will automatically pass the 401(k) testing. This allows the highly compensated employees to defer the maximum contribution. The employer commits to either a matching or profit sharing type contribution.
Maximum Salary Deferral limit - $19,500 plus $6,500 catch-up for individuals age 50 or older in 2020.
Maximum Contributions - 100% of compensation up to $57,000 (includes salary deferral, matching, profit sharing and forfeitures) in 2020.
Maximum Deduction - 25% of eligible compensation plus the salary deferral contributions.
Compensation limit - $285,000 in 2020.
Vesting - Salary deferral and safe harbor contributions are always 100% vested. Most employer contributions are subject to a vesting schedule.
403(b) - Qualified
This type of plan is available only for certain tax exempt or educational organization employers.
Though similar to a 401(k) plan, there are less reporting and testing requirements.
Eligibility - Eligibility requirements only apply to employer contributions. Plans can be designed to require up to one year of service and attainment of age 21.
Employer contributions are discretionary.
Vesting - Salary deferral contributions are always 100% vested. Employer contributions can be subject to a vesting schedule.
Profit Sharing -Qualified
Eligibility - Plans can be designed to require up to one year of service and attainment of age 21. A two-year wait can be used, but will require 100% vesting.
Employer contributions are discretionary.
Maximum Contributions - 100% of compensation up to $57,000 for each individual in 2020.
Maximum Deduction - 25% of compensation.
Compensation limit - - $285,000 in 2020.
Money Purchase Pension - Qualified
Eligibility - Plans can be designed to require up to one year of service and attainment of age 21. A two-year wait can be used, but will require 100% vesting.
Employer contributions are mandatory and are defined up to 25% of compensation.
Compensation limit - $275,000 in 2018.
Vesting - The contributions are subject to a vesting schedule.
Defined Benefit Pension - Qualified
Vesting - The contributions are subject to a vesting schedule.
Eligibility - Plans can be designed to require up to one year of service and attainment of age 21. A two-year wait can be used, but will require 100% vesting.
Employer contributions are determined by an actuary based upon the compensation and age of the participant. Contributions are higher for older individuals.
Benefits accrue each year based upon the plan benefit formula.
Vesting - The benefits are subject to a vesting schedule.
Cash Balance - Qualified
A Cash Balance Plan is a form of defined benefit plan that is simpler for the employer and participant to understand the value of the benefits being offered.
This plan type has the same funding and actuarial characteristics of a regular defined benefit plan.
SEP (Simplified Employee Plan) - IRA
Contributions are made to an IRA for the employee.
Eligibility - All employees are eligible who have attained age 21 and completed service with the employer in three of the last five years.
Maximum Contribution - 25% of compensation up to $57,000 in 2020.
Compensation limit - $285,000 in 2020.Participants are always 100% vested.
Salary deferral SEP. This type of plan is no longer available.
Simple IRA - IRA
For employers with 100 or less employees.
Contributions are made to an IRA for the employee.
Eligibility - Employees who have received compensation and are anticipated to receive compensation of $5,000 or more.
Maximum Salary Deferral limit - $13,500 and $3,000 catch-up for individuals age 50 or older in 2020.
Mandatory Employer Contributions - The employer must agree to make either a matching contribution or a nonelective contribution. * Participants are always 100% vested.