Comparison of Retirement Plans
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| Feature | Basic Plan Type | Who generally adopts | Can employer sponsor other qualified retirement plans | Who can contribute | Cost index | Maximum employee deferral contribution |
| 401(k) | Defined Contribution | Corporations, partnerships, limited liability companies | Yes | Low to High depending upon design complexity, service model adopted and other factors | The lesser of $16,500 for 2011 (Indexed for inflation each year) or 100% of compensation | |
| Solo 401(k) | Defined Contribution | Sole proprietorships, partnerships, limited ability companies and corporations with no common law employees | Yes | Low to Medium | The lesser of $16,500 for 2011 (Indexed for inflation each year) or 100% of compensation | |
| Safe Harbor 401(k) | Defined Contribution | Sole proprietorships, partnerships, limited liability companies and corporations | Yes | Low to Medium | The lesser of $16,500 for 2011 (Indexed for inflation each year) or 100% of compensation | |
| Simple 401(k) | Defined Contribution | Sole proprietorships, partnerships, limited liability companies and corporations with 100 or fewer eligible employees | No | Low to Medium | The lesser of $11,500 for 2011 (Indexed for inflation each year) or 100% of compensation | |
| Profit Sharing | Defined Contribution | Sole proprietorships, partnerships, limited liability companies and corporations | Yes | Low to High depending upon design complexity, service model adopted and other factors | None | |
| SEP IRA | IRA Based | Sole proprietorships, partnerships, and small businesses | Yes | Low | None. Contributions are generally by employer only | |
| SIMPLE IRA | IRA Based | Sole proprietorships, partnerships, limited liability companies and corporations with 100 or fewer employees | No | Employee and employer | Low | The lesser of $11,500 for 2011 (Indexed for inflation each year) or 100% of compensation |
| 403(b) ERISA Title I Plans with employer contributions | Non-profit organizations exempt under IRS Section 501(c)(3) (e.g., churches, hospitals and schools) | 100% of compensation or $16,500, whichever is less. Special catch-up provisions may increase the contribution limit. | ||||
| 457 (b) Eligible Plans with Only Salary Deferral Contributions | Governmental employers, public utility companies, elementary and secondary schools, public universities and colleges, city, county and state hospitals, certain non-governmental tax-exempt employers. | 100% of compensation or $16,500, whichever is less. Special catch-up provisions may increase the contribution limit. Employer contributions offset employee deferrals. | ||||
| 457(f) Ineligible Plans with employer contribution | Governmental employers, publindary schools, public universities and colleges, city, county and state hospitals, certain non-governmental tax-exec utility companies, elementary and secompt employers. | No limit. |
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| Feature | Employer Contributions | Catch-up contributions for those age 50 and older | Employee eligibility | Who directs investments | IRS reporting by employer |
| 401(k) | Discretionary; maximum tax-deductible employer contribution is 25% of eligible payroll; overall maximum contribution per eligible employee is 100% of compensation not to exceed $49,000 | $5,500 for 2011 (Indexed for inflation each year) | Age requirement cannot exceed 21; service requirement can’t exceed one year; may exclude union employees | Employer/Trustee or plan may allow individual direction | Form 5500 |
| Solo 401(k) | Discretionary; maximum tax-deductible employer contribution is 25% of eligible payroll; overall maximum contribution per eligible employee is 100% of compensation not to exceed $49,000 | $5,500 for 2011 (Indexed for inflation each year) | Age requirement cannot exceed 21; service requirement can’t exceed one year; | Individual | Form 5500-EZ when plan assets reach $100,000 |
| Safe Harbor 401(k) | Required match of 100% on the first 3% of employee deferral plus 50% on the next 2% of employee deferral or 3% of compensation to all eligible employees | $5,500 for 2011 (Indexed for inflation each year) | Age requirement cannot exceed 21; service requirement can’t exceed one year; may exclude union employees | Employer/Trustee or plan may allow individual direction | Form 5500 |
| Simple 401(k) | Required match of 100% up to 3% of employee’s compensation or 2% of compensation to all eligible employees | $2,500 for 2011 (Indexed for inflation each year) | Age requirement cannot exceed 21; service requirement can’t exceed one year; may exclude union employees | Individual | Form 5500 |
| Profit Sharing | Discretionary; maximum tax-deductible employer contribution is 25% of eligible payroll; overall maximum contribution per eligible employee is 100% of compensation not to exceed $49,000 | N/A | Age requirement cannot exceed 21; service requirement can’t exceed one year; two years if 100% vested; may exclude union employees | Employer/Trustee or plan may allow individual direction | Form 5500 |
| SEP IRA | Discretionary; cannot exceed the lesser of 25% of the employee’s compensation or $49,000 | N/A | Age requirement cannot exceed 21; have earned compensation in three of the past five years; received compensation of at least $500; may exclude union employees | Individual | None |
| SIMLE IRA | Required match of 100% up to 3% of employee’s compensation (may be reduced to 1% in 2 of any 5 years) or 2% of compensation to all eligible employees | $2,500 for 2011 (Indexed for inflation each year) | All employees earning $5,000 for any past two years and is expected to do so in current year; no age limit permitted; may exclude union employees | Individual | None |
| 403(b) ERISA Title I Plans with employer contributions | The employer’s contributions (including elective deferrals) to an employee’s account should not be more than the lesser of $49,000 or 100% of the employee’s compensation for the year. | $5,500 | Minimum participation, minimum coverage and nondiscrimination requirements may apply | Employer/Trustee or plan may allow individual direction | |
| 457 (b) Eligible Plans with Only Salary Deferral Contributions | Employer and employee contributions combined cannot exceed 100% of the employee’s compensation or $16,500, whichever is less. Employer contributions offset employee deferrals. | Tax-Exempt-N/A Governmental-$5,000. A special catch-up provision for participants within three years of normal retirement age may apply. |
Tax-Exempt-Eligibility for a select group of management or highly compensated employees, except if the group is church-related. Governmental-none. | Individual | |
| 457(f) Ineligible Plans with employer contribution | No limit. | N/A |
Eligibility for a select group of management or highly compensated employees | Employer/trustee; however, plan may allow participant direction |
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| Feature | Establishment deadline | Funding deadline |
| 401(k) | By the last day of the plan year for which the plan is effective | Employee contributions must be deposited as soon as administratively possible, but no later than 15 business days after the month in which the deferrals were made; employer contributions must be deposited by the time the corporate tax return (with extensions) is filed for the tax year in which the deduction is being taken |
| Solo 401(k) | By the last day of the plan year for which the plan is effective | Unincorporated businesses-employer/employee contributions: by the time the corporate tax return (with extensions) is filed for the tax year in which the deduction is being taken; incorporated businesses-employer contributions: by tax-filing date plus extensions and employee contributions must be deposited as soon as administratively possible, but no later than 15 business days after the month in which the deferrals were made |
| Safe Harbor 401(k) | Any date between January 1st and October 1st; may not have an effective date that is before the date plan actually adopted | Employee contributions must be deposited as soon as administratively possible, but no later than 15 business days after the month in which the deferrals were made; employer contributions must be deposited by the time the corporate tax return (with extensions) is filed for the tax year in which the deduction is being taken |
| Simple 401(k) | Any date between January 1st and October 1st; as soon as administratively possible for businesses established after October 1st | Employee contributions must be deposited as soon as administratively possible, but no later than 15 business days after the month in which the deferrals were made; employer contributions must be deposited by the time the corporate tax return (with extensions) is filed for the tax year in which the deduction is being taken |
| Profit Sharing | By the last day of the plan year for which the plan is effective | Contributions must be deposited by the time the corporate tax return (with extensions) is filed for the tax year in which the deduction is being taken |
| SEP IRA | Established by the time the corporate tax return (with extensions) is filed for the tax year in which the deduction is being taken | Funded by the time the corporate tax return (with extensions) is filed for the tax year in which the deduction is being taken |
| SIMLE IRA | Any date between January 1st and October 1st; as soon as administratively possible for businesses established after October 1st | Employee contributions must be deposited within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee in cash; employer contributions must be deposited by the time the corporate tax return (with extensions) is filed for the tax year in which the deduction is being taken |
| 403(b) ERISA Title I Plans with employer contributions | The plan may be established any time during the calendar year. | Employer-The plan may be funded any time during the calendar year. Employee-As soon as reasonable, but no later than 15th business day of the month following the month in which the deferrals are withheld. |
| 457 (b) Eligible Plans with Only Salary Deferral Contributions | The plan may be established any time during the calendar year. | Salary deferral ongoing from payroll. |
| 457(f) Ineligible Plans with employer contribution | The plan may be established any time during the calendar year. | Anytime |
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| Can rollover to: | IRA | SIMLE IRA | Roth IRA | SEP IRA | Simple 401(k) #1 | Safe Harbor 401(k) #1 | 403(b) #1 | Govern-mental 457 #1 | 401(k) #1 | Roth 401(k) #5 | Minimum vesting | Loans | Roth Contri-butions Allowed |
| 401(k) | Yes | No | No | Yes | Yes #3 | Yes | Yes | Yes | Yes | No | Immediate on Employee Contributi-ons; Employer contribute-ons can be subjected to vesting schedule | Emp-loyer option | Yes #6 |
| Solo 401(k) | Yes | No | No | Yes | Yes #3 | Yes | Yes | Yes | Yes | No | Immediate | Emp-loyer option | Yes #6 |
| Safe Harbor 401(k) | Yes | No | No | Yes | Yes #3 | Yes | Yes | Yes | Yes | No | Immediate | Emp-loyer option | Yes #6 |
| Simple 401(k) | Yes | No | No | Yes | Yes #3 | Yes | Yes | Yes | Yes | No | Immediate | Emp-loyer option | Yes #6 |
| Profit Sharing | Yes | No | No | Yes | Yes #3 | Yes | Yes | Yes | Yes | No | Employer contributi-ons can be subjected to vesting schedule | Emp-loyer option | No |
| SEP IRA | Yes | No | Yes | Yes | Yes #3 | Yes | Yes | Yes | Yes | No | Immediate | No | No |
| SIMPLE IRA | Yes #2 | Yes #2 | Yes #2 | Yes #2 #3 | Yes #2 | Yes #2 | Yes #2 | Yes #2 | No | Immediate | No | No | |
| 403(b) ERISA Title I Plans with employer contributions | Yes | Yes | Yes | Yes | |||||||||
| 457 (b) Eligible Plans with Only Salary Deferral Contributions | Yes | Yes | Yes | Yes | |||||||||
| 457(f) Ineligible Plans with employer contribution | No rollovers |
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| Feature | When can withdrawals be taken? |
| 401(k) | Withdrawals can generally be made for the following reasons:
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| Solo 401(k) | Withdrawals can generally be made for the following reasons:
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| Safe Harbor 401(k) | Withdrawals can generally be made for the following reasons:
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| Simple 401(k) | Withdrawals can generally be made for the following reasons:
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| Profit Sharing | Withdrawals can generally be made for the following reasons:
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| SEP IRA | Withdrawals can be taken any time; withdrawals taken prior to an employee reaching age 59(1/2) may be subject to IRS penalties; withdrawals are generally considered taxable income |
| SIMPLE IRA | Withdrawals can be taken any time; withdrawals taken prior to an employee reaching age 59(1/2) and within the first 2 years of participation, may be subjected to a 25% early withdrawal penalty; after 2 years, a 10% early withdrawal penalty would apply; withdrawals are generally considered taxable income |
| 403(b) ERISA Title I Plans with employer contributions | 10% tax penalty unless over 55 and separated form service (except if self-employed or more than 10% owner) or death or disability. Distributions are only allowed upon the occurrence of triggering event. Withdrawals are generally considered taxable income. |
| 457 (b) Eligible Plans with Only Salary Deferral Contributions | Severance from employment, unforeseeable emergencies, small inactive accounts. Also, plan termination and QDROs (if stated in the plan language). No tax penalty applies to any distribution. Withdrawals are generally considered taxable income. |
| 457(f) Ineligible Plans with employer contribution | Distributions must be made on any monies that become vested. No tax penalty applies to any distribution. Withdrawals are generally considered taxable income. |
- Even though a plan may accept rollovers, they are not required to do so. Hardship distributions cannot be rolled over.
- Only after the individual has participated in the SIMPLE IRA for two years.
- Some retirement professionals do not believe that the IRS Code permits such a rollover.
- There is an exception to this rule which allows an employee who retires during the calendar year in which they turn 55, or later, to withdraw without penalty.
- Roth 401(k) funds can only be rolled over to a designated Roth 401(k) account within 401(k) plan or to a Roth IRA.
- This is a design option that the plan may or may not permit.
