DEfined Benefit Pension Plan

This is another form of pension plan primarily used by employers looking for larger contribution deductions.  A typical profile for this plan will be an owner, who has steady compensation, needs to shelter more than  $61,000 for 2022 and is willing to commit to mandatory employer contributions.  Employers are able to target an amount needed for retirement.  Contributions could range up to $230,000 or more per year for older individuals with higher pay and often the contributions can be up to 100 % of pay for those on the lower end of the pay scale.  Great benefit for employers with owners who are older and  staff consisting of  younger employees. 

Profit Sharing Plans

Works best for employers looking to fund their retirement plans without the mandatory funding requirement.  This gives the employer the flexibility to decide on a yearly basis if they want to fund their plan.  Employer deductions range from 0 to 25% of total eligible compensation.  This plan can also be integrated with the social security wage base, which benefits the highly compensated.

 

Age Weighted Plans

For those employers looking for the flexibility a profit sharing provides, while funding higher amounts for older key employees, this is the plan for you.  The formula in this plan gives weight to those employees who are older and have a higher rate of pay. Works great for older highly compensated employers with younger lower paid employees.  Deductions for employer contributions range from 0 to 25% of eligible compensation.

401(k) Plans

Here is a plan that works for employers looking to give employees the ability to fund for their own retirement.  This plan allows both employer and employee contributions.  The current annual limit on employee deferrals is $20,500 for the 2022 plan year.  For employees age 50 and over, the IRS allows a catch up provision in the amount of $6,500 for the 2022 plan year.  This plan requires testing, however new Safe Harbor alternatives give employers options to help pass these tests.  

New Comparability – Rate Group Plans

Provides the latest technology available to help employers target groups of employees at different contribution levels.  This is a profit sharing plan giving the employer flexibility funding.  For example, a company may wish to contribute 15% of pay for Owners, 6% of pay for clerical staff and 5% of pay for janitorial staff.  The groups are classified in different ways to allow for the various contribution levels while still ensuring the plan remains nondiscriminatory based on the definitions provided by the Internal Revenue Service.

Valley Pension Services, Inc. 

Valley Pension Services, Inc. is located in Modesto, California. Our combined experience in the retirement field spans over 50 years.  We are dedicated to serving the retirement needs of the business community.  For more detailed information on the services we provide, please call our office at (209) 572-7410 or fax us at (209) 572-7411.