In our last post, we talked about 401(k) plan alternatives for small companies. Here we’ll discuss retirement plan options for larger companies. Except for the Keogh plan, larger companies can adopt all of the plans available to smaller companies, but there are nine additional options:
Profit Sharing Plan: Employees receive a percentage of the company’s profits based on quarterly or annual earnings.
Money Purchase Pension Plan: The company makes annual contributions to the employees’ pension accounts that are not related to the company’s profits.
Age-weighted Profit-sharing Plan: This plan allows employers to make retirement contributions based on an employee’s age as well as their salary.
New Comparability Plan: A new comparability plan creates classes of employees in a company, and permits the employer to maximize contributions for selected employees.
Thrift/Savings Plan: A TSP is a retirement savings plan for employees and retirees of the federal government, in addition to members of uniformed service organizations such as the military, police, firefighters, EMTs and paramedics.
Defined Benefit Plan: Employers can also establish a pension plan in which the employer deposits a specified monthly amount.
Target Benefit Plan: With a plan of this type, contributions are based on retirement benefit projections; results are tied to the performance of the investments and are not guaranteed.
Cash Balance Plan: The employer makes annual contributions to each individual’s account, and on retirement, the originally defined dollar amount is available to the retiree. The monetary value in the account may increase or diminish over the years, with the risk being borne by the employer.
Employee’s Stock Ownership Plan (ESOP): This plan is for companies owned by the employees, in which shares of the company are divided among the workforce, and on retirement, each employee can then sell their company shares.
Because of the complexities and ramifications involved in selecting and implementing a retirement plan, we recommend that you work with an experienced financial planner or wealth manager like Synergetic Finance. Please contact us with your questions or to set up a complimentary consultation to discuss your company’s retirement planning needs and goals.
Coming soon: Author Joseph M. Maas of Synergetic Finance will be releasing his next book in the Insight series: 401(k) Insight: Getting to Retired!