Employee Plans
Whether you are a business owner looking for personalized, attentive care for your employees’ benefit plan or you are an individual looking to explore other options with your personal retirement funds, we will guide you through the sea of possibilities to the most suitable option.
As the need to personally prepare for retirement increases, so too has the pressure that falls on the business owner to make difficult decisions for both the business and the employees. FireTree Financial can help lift the weight off your shoulders, giving you information and opportunities to more effectively plan for your future of your business and your employees.
401(k) Plan
A retirement savings plan, established by an employer, that allows employees to send a percentage of their pre-tax compensation into a retirement account. Employers may match a percentage of the amount that the employee has withheld. If funds are withdrawn from a 401(k) before the owner is age 59.5, the proceeds are taxed at the individual’s regular rate and a 10 percent penalty is assessed. Many 401(k) plans allow employees to borrow against the money in the plan.
Roth 401(k) Plan
An employer-sponsored investment savings account that is funded with after-tax money. After the investor reaches age 59.5 and after five years have passed since first contribution, withdrawals of any money from the account (including investment gains) are tax-free. Unlike the Roth IRA, the Roth 401(k) has no income limitations for those investors who want to participate – anyone, no matter what his or her income, is allowed to invest up to the contribution limit into the plan.
403(b) Plan
A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations and certain ministers.
Defined Benefit Plan
An employer-sponsored retirement plan where employee benefits are sorted out based on a formula using factors such as salary history and duration of employment. Investment risk and portfolio management are entirely under the control of the company. There are also restrictions on when and how you can withdraw these funds without penalties.
SEP Plan – Simplified Employee Pension Plan
A plan that allows a business to make contributions to a retirement plan for employees. A SEP agreement is adopted by the company and contributions are made directly to a traditional individual retirement account (IRA) or a traditional individual retirement annuity (SEP-IRA) set up for each employee. Employers can deduct the amount of contributions made on behalf of employees from their taxes. Sole proprietors can deduct the amount of a contribution on their tax returns. The maximum contribution is $49,000 or 20 percent of a participant’s compensation, which generally is limited to $245,000.
SIMPLE IRA
A savings incentive match plan for employees of small businesses with 100 or fewer employees. The plan is similar to, but more flexible than, a regular IRA. Employees enter into a qualified salary reduction agreement to contribute a percentage of their annual compensation to a tax-deferred retirement account. The employer may either match employee contributions or contribute a fixed percentage of all employees’ pay. All earnings grow tax-deferred. SIMPLE is an acronym for Savings Incentive Match PLan for Employees of small employers.
Cash Balance Pension Plan
A pension plan under which an employer credits a participant’s account with a set percentage of his or her yearly compensation plus interest charges. A cash balance pension plan is a defined-benefit plan. As such, the plan’s funding limits, funding requirements and investment risk are based on defined-benefit requirements: as changes in the portfolio do not affect the final benefits to be received by the participant upon retirement or termination, the company solely bears all ownership of profits and losses in the portfolio. Although the cash balance pension plan is a defined-benefit plan, unlike the regular defined-benefit plan, the cash balance plan is maintained on an individual account basis, much like a defined-contribution plan. The cash balance plan acts similar to a defined-contribution plan also because changes in the value of the participant’s portfolio does not affect the yearly contribution.
Individual 401(k) Plan
A 401(k) plan set up for an individual running a sole proprietorship or a small business with a spouse/immediate family member. Plan contribution limits for the individual are equal to a typical company-sponsored 401(k), but the sole proprietor can also make an employer contribution to an independent 401(k), thereby raising the total contribution allowed.
