Retirement Plan Comparison Chart 2015 Limits - page 4

Owners 401(k) Plan
Traditional 401(k) Plan
Safe Harbor 401(k) Arrangements
In essence, an Owners 401(k) plan combines a
profit-sharing plan with a 401(k) plan. It can be
used for one-person firms or partnerships with no
common-law employees.
A 401(k) plan allows employees to make pre-tax and
post-tax contributions through payroll deductions.
Employer contributions generally are not required;
however, the majority of plans do provide employer
matching or profit-sharing contributions.
Internal Revenue Code provisions grant “safe
harbor” relief to plan sponsors from certain 401(k)
nondiscrimination testing requirements, if the plans
meet certain design and notice requirements. These safe
harbor provisions are:
ADP/ACP Safe Harbor Contribution
Qualified Automatic Contribution Arrangement (QACA)
Owners and spouses (can also include children,
grandchildren and parents of owner). Owners can
deduct profit-sharing contribution up to 25% of
compensation. Compensation limit for contributions is
$265,000 for 2015. Owners can also defer $18,000 in
2015 in addition to the 25% deduction referenced
above, up to a maximum of $53,000 in 2015. Spouses
who are employed and receive compensation from the
business can defer the lesser of $18,000 or 100% of
compensation. Spouses also receive an employer
contribution, subject to a total contribution of the lesser
of 100% of pay or $53,000 in 2015.
Employees only, or employees and employer. Employees
can contribute up to $18,000 in 2015, subject to
employee/employer total contribution of the lesser of
100% of pay or $53,000 in 2015.
Same as a traditional 401(k) plan. For ADP/ACP
Safe Harbor, there is a mandatory match of employee
deferrals up to 4% of compensation or a mandatory
employer contribution of 3% of compensation for
all eligible employees. For QACA, minimum initial
automatic employee deferral of 3% (cannot exceed
10%) for the initial year of participation, and must
increase each year by at least 1% for the next three
plan years after acquiring safe harbor (maximum of
6%). Any eligible employee who has not made an
affirmative election to defer must be automatically
enrolled. A mandatory employer contribution of 3% of
compensation for all eligible employees or a match of
employee deferrals up to 3.5% of compensation.
Owner can contribute meaningful dollars toward the
retirement of his or her spouse or certain other family
members employed by the business.
Catch-up contributions may be made by participants
age 50 and over. The catch-up contribution is limited
to $6,000 in 2015.
Employers can institute loan privileges that will allow
employees to borrow up to $50,000 or 50% of their
vested assets, whichever is less.
Hardship withdrawals may be made available.
Plan may provide for after-tax designated
Roth contributions.
Employees gain a valuable benefit since contributions
accumulate on a tax-deferred basis.
Employees generally make investment decisions.
Benefit from increased contribution limits.
Hardship withdrawals are available.
Catch-up contributions may be made by participants
age 50 and over. The catch-up contribution is limited
to $6,000 in 2015.
Employers may choose to institute loan privileges that
will allow employees to borrow up to $50,000 or 50%
of their vested assets, whichever is less.
Plan may provide for after-tax designated
Roth contributions.
Same Key Advantages as a 401(k) plan.
Under ADP/ACP Safe Harbor Contribution Plans:
Owners can contribute the maximum allowed,
regardless of employee participation levels, as long as
mandatory employer contributions are made.
No ADP/ACP nondiscrimination plan testing required.
Plan is exempt from top-heavy requirements (unless
other employer contributions are made in addition to
the mandatory contributions).
Under QACA:
Owners can contribute the maximum allowed,
regardless of employee participation levels, as long as
mandatory employer contributions are made.
Employer contribution can be subject to vesting
schedule (two-year maximum).
No ADP/ACP nondiscrimination plan testing required.
Plan is exempt from top heavy requirements (unless
other employer contributions are made in addition to
the mandatory contributions).
If owners build their businesses and hire common-law
employees, this plan type is generally not beneficial
for the owners, and may become unavailable.
Greater administrative requirements and costs than
a SEP.
Greater administrative requirements and costs than
a SIMPLE plan.
ADP/ACP Safe Harbor Contribution Plan —
Required employer contributions are 100% vested
immediately. Additional discretionary employer
contributions can be subject to vesting schedule.
Mandatory annual employee notice requirements.
QACA —
Employer matching contribution amount
may be higher due to increased participation of
automatically enrolled participants. Mandatory
annual employee notice requirements.
Greater administrative requirement and costs than a
SIMPLE plan.
1,2,3 5,6
Powered by FlippingBook