Qualified Plans

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Qualified Plans such as 401(k) and Pensions

A qualified plan is an employer-sponsored retirement plan that qualifies for special tax treatment under Section 401(a) of the Internal Revenue Code.

The annual contribution limits and other rules vary among specific types of plans. However, most qualified plans share certain key features, including:

  • Pretax contributions: Employer contributions to a qualified plan are able to be made on a pretax basis. That is, you don’t pay FICA, FUDA, SUDA and in some case workers comp tax on amounts you contribute. Additionally, your employee doesn’t pay taxes on his contributions until he/she withdraws money from the plan.
  • Tax-deferred growth: Investment earnings (e.g., dividends and interest) on all contributions are tax deferred. Again, you don’t pay income tax on those earnings until you withdraw money from the plan.
  • Employer Contributions:  You may also choose to offer employer matching contributions and/or profit sharing contributions within a qualified plan.
  • Vesting: If the plan provides for employer contributions, those amounts (and related investment earnings) can be subject to a vesting schedule, which you determine, before the employee is entitled to them.

We offer two investment formats within group qualified retirement plans:

1.  Participant-Directed: This approach enables your employees to choose their own investment options from among the funds offered. Fund performance is posted online monthly. Participants have three options under this approach:

  • Do-It-Yourself: Participants can make their own selections from among the asset class funds offered, creating their own portfolios and asset allocations.
  • Pro-Mix: Under the Transamerica fund platform, participants take our risk tolerance questionnaire and then choose the appropriate risk-based life cycle fund from the four that are offered. For employers choosing the Nationwide option, participants choose the target date life cycle fund which corresponds to their date of birth and anticipated retirement date.
  • Default: If participants do not choose an investment, they will be defaulted to the Manning & Napier Pro-Mix ® Moderate-Term Fund for the Transamerica investment platform. For sponsors who have the Nationwide investment platform, participants will be defaulted to the target date life cycle fund which corresponds to their date of birth and anticipated age 65 retirement date.

2.  Trustee-Directed: Sponsors will select one investment for all participants from three distinct investments with varying risk categories: conservative, moderate and balanced. This option allows employers to offer a retirement plan they feel is most appropriate for their workforce. Employers with multiple worksites or other barriers to the standard employee enrollment process often choose a trustee-directed plan.

We work with the most stable, highly rated companies in this industry.  Contact us to schedule an appointment or for more info.