Benefits

Helping Employees Save for the Future

Experts estimate that in the American workforce as a whole, workers will need 70 to 90 percent of their pre-retirement income to maintain their current standard of living when they stop working. Lower income earners may need more than 90 percent. Among workers 25 to 64 years of age, a little more than half are participants in an employer-sponsored retirement plan.

You can help your employees save for the future and help secure your own retirement with a retirement savings plan. Offering a retirement plan may also help you attract and retain better-qualified employees. Tax advantages have made it more appealing than ever to establish and contribute to a retirement plan. These tax advantages may include the following, depending on the type of plan selected:

  • Employer contributions are deductible from the employer’s income;
  • Employee contributions (other than Roth contributions) are not taxed until distributed to the employee; and
  • Money in the plan grows tax-deferred.

Here is a basic overview of four different retirement plans.

Payroll Deduction IRA

  • Key Advantage: Easy to set up and maintain.
  • Sponsor or Eligible Employer: Any employer.
  • Plan Contributions: Employees can decide how much to contribute.
  • Maximum Annual Contribution (per participant): Employee: $6,000 for 2019. Age 50 or over: additional employee contribution of $1,000 for 2019.
  • Loans: Not permitted.
  • Withdrawals: Permitted at any time and are subject to federal income taxes (an additional 10% tax applies if before age 59½).
  • Distributions: Participants must start receiving distributions by April 1 of the year following attainment of age 70½ (special rule applies to Roth IRAs).
  • Vesting: Contributions are immediately 100% vested.

Simple IRA Plan

  • Key Advantage: Salary reduction plan with little administrative paperwork.
  • Sponsor or Eligible Employer: Employers with 100 or fewer employees that do not currently maintain another plan.
  • Plan Contributions: Employees can decide how much to contribute. Employer must make matching contributions or contribute 2% of each eligible employee’s compensation.
  • Maximum Annual Contribution (per participant): Employee: $13,000 for 2019. Employer: either match employee contributions 100% of first 3% of compensation (can be reduced to as low as 1% in any 2 of 5 years); or contribute 2% of each eligible employee’s compensation. Age 50 or over: additional employee contribution: $3,000 in 2019.
  • Loans: Not permitted.
  • Withdrawals: Permitted at any time and are subject to federal income taxes (an additional 10% tax applies if before age 59½; 25% if less than 2 years of participation).
  • Distributions: Participants must start receiving distributions by April 1 of the year following attainment of age 70½ (special rule applies to Roth IRAs).
  • Vesting: Employer and employee contributions are immediately 100% vested.

401(k)

  • Key Advantage: Permits high level of salary deferrals by employees. May include designated Roth program.
  • Sponsor or Eligible Employer: Any non-government employer.
  • Plan Contributions: Employee elective deferral contributions. Employer contributions are permissible but not required.
  • Maximum Annual Contribution (per participant): Employee Elective Deferrals: $19,000 for 2019. Employer & Employee: lesser of $56,000 for 2019 or 100% of compensation. Age 50 or over—additional elective deferrals: $6,000 in 2019.
  • Loans: May be permitted.
  • Withdrawals: Permitted after a distributable event occurs (e.g., retirement, death, disability, severance from employment). Hardship withdrawals may be permitted. Early withdrawals subject to 10% additional tax.
  • Distributions: Must start receiving distributions by April 1 following the later of year of retirement or attainment of age 70½.
  • Vesting: Employee elective deferral contributions are immediately 100% vested. Employer contributions may vest over time according to plan terms.

Defined Benefit Plan

  • Key Advantage: Provides a fixed pre-established benefit for employees.
  • Sponsor or Eligible Employer: Any employer.
  • Plan Contributions: Primarily funded by employer.
  • Maximum Annual Contribution (per participant): Actuarially determined contribution.
  • Loans: Permitted.
  • Withdrawals: Early withdrawals subject to 10% additional tax.
  • Distributions: Payment of benefits after a distributable event occurs (e.g., retirement, death, disability, severance from employment). Must start receiving distributions by April 1 following the later of year of retirement or attainment of age 70½.
  • Loans: Permitted.
  • Vesting: May vest over time according to plan terms.

Contact us today to learn more about these and other retirement plans. We can help you choose a plan that fits the needs of your employees and your business.

Leavitt Group—national resources, local trust. Leavitt Group is the 10th largest independently held insurance brokerage in the United States. We pride ourselves on our expertise and ability to help our clients succeed. Contact our agency near you

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