Retirement Planning
A qualified retirement plan is a tax-deferred retirement savings program offered by a company for the benefit of its employees. Your business would generally offer a defined contribution type of plan.
A defined contribution plan could be a wide range of plans. Some plans allow employees to invest their own money; other includes contributions from the employer or a combination of the two. Usually participant-directed, these plans chosen by the employer or the employer have designated trustees. The most common types of these plans are 401K plans, profit-sharing and SIMPLE IRA's (Individual Retirement Accounts that can be used to make pre-tax contributions for business owners and their employees).
In these types of plans, employees receive as a benefit what they have invested and the earnings on that investment. They may also have access to money the employer has contributed, through a company match or other company contribution to the plan, which is subject to vesting. Typically, employees must meet certain criteria, such as length of time employed before they are fully vested. Usually, employees are not entitled to the employer contribution money in the account until they are at least partially vested.
These plans are tax advantaged, which means that employees don't pay taxes on the earnings until they withdraw the money. This benefit allows employers to take the money out of an employees check pre-tax, creating a tax benefit during the earning years.
Retirement Plan Management
How do I know if I'm fulfilling my fiduciary responsibilities?
It is easier than you might think to measure how well you are doing. Consider the checklist to the right.
- If you have an existing plan, do you fully understand your plan document and design?
- Do your plan fiduciaries meet regularly and keep notes from these meeting?
- Does your plan have a written investment policy statement?
- Does your plan offer diversified investments?
- Have you reviewed the investments available in your plan in the last 12 months?
- Do you understand the investment cost within you plan?
- Do you understand the services provided by the various people and companies that service your plan?
- Do you understand the costs associated with these services?
- Can you select investment funds without provider restrictions on the number of outside funds that can be included in the plan?
- Does your plan provide employee-enrollment programs that explain the importance of participation?
- Does your plan proved asset-allocation funds or models for employees who lack investment knowledge?
- Do you understand ERISA Section 404(c) requirements?
