PLAN COMPARISON

Plan Type or Plan Feature
What you Need to Know
Contribution Limits (2018)
  • TRADITIONAL 401(k) PLAN
    • Plan Type or Plan Feature

      A defined contribution plan that provides for employee elective deferral contributions.

    • What you Need to Know
      • Pre-tax or Roth elective deferral contributions permitted.
      • Discretionary matching and/or profit sharing contributions permitted.
      • Automatic enrollment and automatic escalation provisions permitted.
    • Contribution Limits (2018)
      • Salary deferral limit:  Lesser of 100% of compensation or $18,500 plus catch-ups for employees age 50+, if permitted in the plan.
      • Total employee contribution limit:  $55,000 plus catch-ups for employees age 50+, if permitted in the plan.
      • Employer tax deduction:  25% of total eligible payroll (payroll limited by annual compensation limit).
  • SAFE HARBOR 401(k) PLAN
    • Plan Type or Plan Feature

      A defined contribution plan that automatically passes annual non-discrimination testing if certain contribution, vesting and participant notification requirements are met.

    • What you Need to Know
      • Pre-tax or Roth elective deferral contributions permitted.
      • Allows highly compensated employees to defer up to the maximum amount allowable, no matter how much non-highly compensated employees defer.
      • An annual notice is required.
      • An employer-funded, 100% vested matching or non-elective contribution is required.
      • Discretionary matching and/or profit sharing contributions permitted.
      • Automatic enrollment and automatic escalation provisions permitted.
    • Contribution Limits (2018)
      • Salary deferral limit:  Lesser of 100% of compensation or $18,500 plus catch-ups for employees age 50+, if permitted in the plan.
      • Total employee contribution limit:  $55,000 plus catch-ups for employees age 50+, if permitted in the plan.
      • Employer tax deduction:  25% of total eligible payroll (payroll limited by annual compensation limit).
  • SIMPLE 401(k) PLAN
    • Plan Type or Plan Feature

      A defined contribution plan that automatically passes annual non-discrimination testing if certain contribution, vesting and participant notification requirements are met.

    • What you Need to Know
      • Pre-tax or Roth elective deferral contributions permitted.
      • Allows highly compensated employees to defer up to the maximum amount allowable, no matter how much non-highly compensated employees defer.
      • An annual notice is required.
      • An employer-funded, 100% vested matching or non-elective contribution is required.
      • The required matching or non-elective contribution is less than that for a Safe Harbor 401(k) Plan or a Qualified Automatic Contribution Arrangement.
      • Discretionary matching and/or profit sharing contributions are not permitted.
      • Automatic enrollment and automatic escalation provisions permitted.
      • Must have 100 or fewer employees.
      • Cannot have any other qualified retirement plans.
    • Contribution Limits (2018)
      • Salary deferral limit:  Lesser of 100% of compensation or $12,500 plus catch-ups for employees age 50+ if permitted in the plan.
      • Total employee contribution limit:  $55,000 plus catch-ups for employees age 50+ if permitted in the plan.
      • Employer tax deduction:  25% of total eligible payroll (payroll limited by annual compensation limit).
  • SOLO 401(k) PLAN
    • Plan Type or Plan Feature

      A defined contribution plan sponsored by sole proprietorships, partnerships with multiple owners or other entities and their spouses with no non-owner employees.

    • What you Need to Know
      • Pre-tax or Roth elective deferrals are permitted.
      • Can be paired with a cash balance plan to provide increased benefits.
      • Discretionary employer matching and/or profit sharing contributions are permitted.
    • Contribution Limits (2018)
      • Salary deferral limit:  Lesser of 100% of compensation or $18,500 plus catch-ups for employees age 50+, if permitted in the plan.
      • Total employee contribution limit:  $55,000 plus catch-ups for employees age 50+, if permitted in the plan.
      • Employer tax deduction:  25% of total eligible payroll (payroll limited by annual compensation limit).
  • 403(b) PLAN
    • Plan Type or Plan Feature

      A defined contribution plan for tax-exempt organizations, including public schools, governmental employers and other employers who are tax-exempt under Code Section 501(c)(3), churches and church-related organizations.

    • What you Need to Know
      • Pre-tax or Roth elective deferral contributions permitted.
      • Discretionary matching and/or non-elective contributions permitted.
      • Automatic enrollment and automatic escalation provisions permitted.
      • Safe Harbor provisions permitted.
      • Special catch-up contributions permitted.
      • Age 50 catch-up contributions permitted.
      • Universal Availability applies for elective deferrals for most employers.
    • Contribution Limits (2018)
      • Salary deferral limit:  Lesser of 100% of compensation or $18,500 plus catch-ups, if permitted in the plan.
      • Total employee contribution limit:  $55,000 plus catch-ups, if permitted in the plan.
      • Employer tax deduction:  25% of total eligible payroll (payroll limited by annual compensation limit).
  • 457(b) PLAN
    • Plan Type or Plan Feature

      A non-qualified, tax advantaged deferred-compensation retirement plan that is available for governmental and non-governmental employers who are tax exempt under Code Section 501.

    • What you Need to Know
      • For non-governmental employers, plan participation is limited to highly compensated and management employees only.
      • Roth elective deferrals not permitted in non-governmental employer plans.
      • Discretionary matching and/or non-elective contributions permitted.
      • Special Normal Retirement Age catch-up contributions permitted.
      • Age 50 catch-up contributions permitted in governmental employer plans.
    • Contribution Limits (2018)
      • Salary deferral limit:  Lesser of 100% of compensation or $18,500 plus catch-ups, if permitted in the plan.
  • CASH BALANCE PLAN
    • Plan Type or Plan Feature

      An employer-funded plan that provides for a certain account balance at retirement.

    • What you Need to Know
      • Plan contributions are required based on the formula in the plan document.
      • The formula provides a pay credit based on earnings each year and an interest credit.
      • Plan provides for understandable account balances, similar to a 401(k) Plan.
      • Unlike a defined benefit plan, the present value of the benefit does not increase when interest rates decrease.
    • Contribution Limits (2018)
      • Annual employee benefit  limit:  $220,000.
  • Defined Benefit Plans
    • Plan Type or Plan Feature

      An employer-funded plan that provides for a certain monthly benefit at retirement.

    • What you Need to Know
      • Plan contributions are required based on the formula in the plan document.
      • The formula for determining the benefit can be based on earnings history, length of service and age.
      • For years in which investment returns are in excess of expected, contributions for employees are minimal or not required.
    • Contribution Limits (2018)
      • Annual employee benefit limit:  $220,000.
  • MONEY PURCHASE PLAN
    • Plan Type or Plan Feature

      An employer funded defined contribution plan that requires the employer to contribute a fixed percentage of each employee’s salary every year.

    • What you Need to Know
      • Annual contributions are required based on the contribution formula set forth in the plan document.
      • Money purchase plans were popular before contribution limits for profit sharing plans were increased. They provided an additional way to save more for retirement. Those limits can now be reached with a stand-alone profit sharing plan or 401(k) plan with a profit sharing contribution provision.
    • Contribution Limits (2018)
      • Employee limit:  $55,000.
      • Employer tax deduction:  25% of total eligible payroll (payroll limited by annual compensation limit).
  • PROFIT SHARING PLAN
    • Plan Type or Plan Feature

      An employer funded defined contribution plan that allows employers to make contributions to employees based on the company’s profitability.

    • What you Need to Know
      • Contributions are flexible and discretionary.
      • A profit sharing contribution provision can also be part of a 401(k) plan.
    • Contribution Limits (2018)
      • Employee limit:  $55,000.
      • Employer tax deduction:  25% of total eligible payroll (payroll limited by annual compensation limit).
  • AUTOMATIC ENROLLMENT PROVISION
    • Plan Type or Plan Feature

      Provides for automatic enrollment of employees in a traditional 401(k) or Safe Harbor 401(k) defined contribution plan.

    • What you Need to Know
      • Employees who do not make a deferral election upon becoming eligible for the plan are automatically enrolled into the plan at a deferral rate specified in the plan document.
      • Automatic escalation is permitted.
      • Annual notice is usually required.
      • Extended testing deadline/corrective distribution period may apply.
    • Contribution Limits (2018)
      • Salary deferral limit:  Lesser of 100% of compensation or $18,500 plus catch-ups for employees age 50+ if permitted in the plan.
  • CROSS-TESTED (NEW COMPARABILITY) PROFIT SHARING ALLOCATION FORMULA
    • Plan Type or Plan Feature

      A formula that favors older, long-term employees, who based on age, are closer to retirement.

    • What you Need to Know
      • Contributions to owners and other highly compensated employees can be much higher than under a traditional profit sharing allocation formula if on average they are older than other employees and have longer terms of service.
    • Contribution Limits (2018)
      • Dependent on the type of plan to which the contribution is being made.
  • QUALIFIED AUTOMATIC CONTRIBUTION ARRANGEMENT
    • Plan Type or Plan Feature

      A defined contribution plan 401(k) plan that automatically passes annual non-discrimination testing if certain contribution, vesting, automatic deferral and participant notification requirements are met.

    • What you Need to Know
      • Allows highly compensated employees to defer up to the maximum amount allowable, no matter how much non-highly compensated employees defer.
      • An annual notice is required.
      • An employer-funded matching or non-elective contribution is required.
      • The required matching contribution is less than that for a Safe Harbor 401(k) Plan.
      • A vesting schedule (up to a 2-year cliff schedule) can be applied to the employer-funded matching or non-elective contribution.
      • Automatic enrollment provision of at least 3% escalating to 6% is required.
    • Contribution Limits (2018)
      • Salary deferral limit:  Lesser of 100% of compensation or $18,500 plus catch-ups for employees age 50+, if permitted in the plan.
      • Total employee contribution limit:  $55,000 plus catch-ups for employees age 50+, if permitted in the plan.
      • Employer tax deduction:  25% of total eligible payroll (payroll limited by annual compensation limit).
  • ROTH ELECTIVE DEFERRALS
    • Plan Type or Plan Feature

      Employee funded after-tax deferrals made to a traditional 401(k) or Safe Harbor 401(k) defined contribution plan.

    • What you Need to Know
      • Deferral contributions are made on an after-tax basis.
      • Qualified withdrawals of Roth deferrals and earnings are tax-free.
      • Employees that expect their tax rate to be higher in retirement than it is today are best candidates for Roth elective deferrals.
    • Contribution Limits (2018)
      • Salary deferral limit:  Lesser of 100% of compensation or $18,500 plus catch-ups for employees age 50+, if permitted in the plan.

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