Benefits of a Qualified Retirement Plan for the Employer/Plan Sponsor
- Employer contributions are tax deductible.
- Assets in the plan grow tax-free.
- A retirement plan can attract and retain good employees.
- The plan can be structured to accumulate significant benefits for selected employees.
- Businesses may receive tax credits and other incentives for starting a plan. This tax credit helps small businesses offset the costs of setting up and administering a new qualified employer plan and educating employees about it. The maximum credit amount is $5,000 per year, and is a function of the amount of the plan’s startup costs and the number of non-highly compensated employees (NHCEs) covered by the plan. After the first year the credit is claimed, it may be claimed again only in the following two years. To qualify, a business must have had no more than 100 employees who received at least $5,000 in pay during the preceding year. The plan must include at least one NHCE.
Benefits of a Qualified Retirement Plan for the Employee/Plan Participant
- Tax on employee contributions is deferred until distributed.
- Investment gains in the plan are not taxed until distributed.
- Contributions can usually be made through payroll deductions.
- Provides a way to accumulate substantial retirement income.
- Plan benefits are protected under ERISA from creditors.
- Some 401(k) savers may also be eligible for an additional tax credit, simply for saving.
Contact Our Retirement Plan Professionals
Pinnacle Plan Design is a third-party administrator (TPA) for employer-sponsored qualified retirement plans. We specialize in retirement plan design, administration and actuarial consulting for 401(k)/profit-sharing plans, defined benefit plans, cash balance plans, and 403(b) plans. Pinnacle Plan Design proudly serves businesses nationwide.