Services

Profit Sharing Plans / 401 (k) Plans / Defined Benefit Plans / Making Choices

>> A Summary of Our Services

Meeting with you for an annual review of your pension plan’s legal status and evaluation of your goals.

Providing ongoing consultation with you, your financial advisor and other important participants.

An evaluation of your employee census data at plan year end to determine eligible employees.

Reconciliation of all trust assets and preparation of an annual trust report.

An evaluation of coverage requirements and a top-heavy status report.

A review of the provisions of your plan to maintain qualified status and remain in compliance.

Advice and recommendations on the contribution amount permitted or required.

Preparation of an annual Actuarial Report and Certification by an Enrolled Actuary on IRS Schedule B, if required.

Preparation of a Summary Annual Report as required by the Department of Labor.

Preparation of an annual report showing the status of your plan and each participant’s valuation.

Preparation of each participant’s certificate.

Performance of ADP and ACP testing of 401(k) plans.

Completion of all required nondiscrimination testing for qualified retirement plans.
An employee awareness meeting to help participants understand how they are benefiting from the plan.

>> Profit Sharing Plan

Each year the Employer decides how much to contribute into this Plan. The amount many vary between 0% and 25% of the pay of the eligible employees. It is not necessary to have current or accumulated profits to make a contribution.

Highlights of a Profit Sharing Plan
• Total flexibility – the ability to make a tax-deductible contribution or not, whether there are profits or not.
• Advantageous to businesses that do not wish to commit to a contribution each year.
• Maximum contribution is $40,000 per participant. Maximum compensation used for plan purposes is $200,000 in
  2003.
• Share of the contribution is based on each participant’s compensation.
• Shares can be designed to benefit selected employees by various allocation methods.
  It can favor a select group of employees based on age, compensation or specific classes of employees.
• Earnings accumulate tax deferred.
• Forfeitures can reduce future costs or can be reallocated to participants.

Salary Proportion
This is the traditional plan that allocates the contribution percent, such as 25%, equally to each participant, based on compensation. Therefore, each participant receives the same percent of compensation.

Integrated
This allocation method first gives a bit more to anyone making above the Social Security Wage Base of $84,900.00 for 2002. No Social Security credit is given for compensation above the Wage Base, so Social Security favors lower paid employees. This allocation method was designed to help equalize higher paid employees who may not get equal treatment from the Social Security system.

Age Weighted
This method favors older paid employees because they have less time until normal
retirement age to fund a plan. This allocation method projects account values to retirement age and usually must fund more to older employees to reach comparable value.

Tiered Allocation
IRS regulations now allow employees to divide plan participants into two or more “classes”. They provide a method, based on an analysis of projected benefits at retirement age, that shows this plan is not discriminatory. This is done by converting contributions into benefits and through cross-testing each class benefit against each other class benefit, we assure that this is not discriminatory.

>> 401(k) Plan

A 401(k) Plan is, for the most part, funded by employees. This is funded by wage deferrals, voluntarily chosen by each eligible employee, up to $13,000(indexed) for 2004. The Employer may match deferrals. The Employer may also fund the Profit Sharing Portion of this arrangement.

Highlights of a 401(k) Plan
• A Profit Sharing Plan with a 401(k) feature, having all the benefits of a Profit Sharing Plan
• Optional employee deferrals of salary up to $13,000(indexed) per participant.
• Total allocation to participants cannot exceed the lesser of 100% of covered compensation up to $41,000
  (indexed) per participant. Currently the maximum compensation for 2004 is $205,000 (indexed) .
• Additional contributions for older employees are allowed.
• Earnings accumulate tax deferred.
• All employees are 100% vested in employee deferrals. Generally, a vesting schedule is attached to any Company
  match.
• A very popular employee benefit at a lower cost to the Employer.

>> Defined Benefit Plans

A Defined Benefit Pension Plan defines the dollar amount of employees’ retirement benefit in the plan provisions. The Employer has a minimum funding requirement, regardless of profitability. This amount is calculated each year by an Actuary to assure adequate funds to meet the benefit defined in the Plan Document. Benefits received at retirement are limited to $160,000 per year (indexed). This increases with the cost of living.

Highlights of Defined Benefit Pension Plans
• Requires annual funding.
• Retirement amounts are determined based on compensation and age of participants.
• Excess earnings and forfeitures benefit the Employer.
• Can permit sheltering of more funds than any other type of Plan.
• Favors older, highly compensated, long service participants.

>> Making Choices In Retirement Plans

The rules for retirement plans are vast and complex, but the benefits of having a retirement plan can be significant. Sheffler & Martin, Inc. will assist you in understanding why.

Considerations that will affect your choice of retirement plan are:
• How many employees work for your company?
• Who should be favored?
    – Older or younger employees?
    – Owners or key employees?
• What is the age and turnover rate of your workforce?
• What type of entity is your company – corporate or non corporate?
• What are your cost considerations?
• What are your employees’ expectations?
• What are your tax-deferral issues?
• What level of income tax savings interests you?
• A broad range of qualified retirement plans exist.
    – What are the differences?
    – What are the advantages and disadvantages?
    – What works best for you?
• Sheffler & Martin, Inc. can provide you with the assistance you need so your qualified retirement plan is installed and administered efficiently and correctly. We can help you decipher the regulations, understand your responsibilities and make administering your retirement plan as easy as possible!

For a proposal of a retirement plan design that will benefit your company please go to our Proposal Request Form