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At North Central Trust Company, we realize that
some businesses have unique scenarios and that
meeting certain requirements for standard retirement
plan benefit services is difficult to do. For
that reason we offer the following plan enhancements:
DEFERRED COMPENSATION
PLANS:
Plans established to supplement
the retirement benefits provided under a company’s
qualified retirement plan for the benefit of
key executives, members of the board of directors,
or certain selected highly compensated employees.
Such plans have become more important in retirement
planning because of:
-
the complexity of the
law regarding qualified plans and the changes
that often occur to that law and
-
the limitations on contributions
to qualified plans that restrict the ability
of highly compensated and key employees
to maximize their contributions to their
retirement plans.
For those companies that find
their retirement program insufficient to provide
appropriate retirement benefits to key employees,
a deferred compensation plan can be
the answer. It will allow for the application
of this key benefit to only certain select employees.
CROSS-TESTED AND AGE-WEIGHTED QUALIFIED
PLANS:
Such plans apply the principles
of a defined benefit plan with the operation
of a defined contribution plan by normalizing
benefits based on the principles of the time
value of money, which emphasizes the theory
that the younger a participant is, the more
years of earnings are available to grow an annual
contribution into a meaningful account balance
at retirement. Therefore, higher contribution
rates for older, highly compensated employees
will not necessarily cause the plan to be discriminatory,
since on a projected benefits basis, the younger
employees are actually receiving the value of
a much greater benefit in the future, even though
their current contribution levels are not as
high.
While not for all businesses,
given the appropriate demographics and levels
of compensation, such plans can be most beneficial
to certain select businesses.
SAFE-HARBOR 401(k) PLANS:
Qualified retirement plans
that satisfy certain special criteria of the
Internal Revenue Code will find it unnecessary
to meet the often restrictive contribution limits
imposed by the Average Deferral Percentage (ADP)
test. Those plans that satisfy the criteria
are deemed to have automatically satisfied the
ADP test and need not meet its requirements.
To qualify for safe harbor status,
a 401(k) plan must satisfy the following conditions:
- a required contribution standard,
- a specific vesting schedule,
- specific account withdrawal restrictions,
and
- a designated annual notice requirement.
Where appropriate, the need
to meet the ADP test, which is an onerous and
restrictive burden on certain qualified 401(k)
plans, can be eliminated.
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