Employer Contribution

We offers employ­er con­tri­bu­tion plans (or employ­er-spon­sored plans) includ­ing SEP IRA, Prof­it Shar­ing and Defined Ben­e­fit plans. Learn about these plans and their ben­e­fits for employ­ers and employ­ees.

What is a Simplified Employee Pension Plan (SEP IRA)?

The SEP IRA is an alter­na­tive to more com­plex employ­er-spon­sored retire­ment plans. It was designed for employ­ers that want to estab­lish and con­tribute to a retire­ment plan for employ­ees. It is com­mon­ly used by self-employed indi­vid­u­als or employ­ers who don’t offer oth­er qual­i­fied plans.

SEP IRA at a Glance

Who May Estab­lish
  • All busi­ness types.
  • For prof­it and not-for-prof­it orga­ni­za­tions of any size.
Admin­is­tra­tor Test­ing None.
Estab­lish­ment New plans must be estab­lished by the employer’s tax fil­ing due date, plus IRS-approved fil­ing exten­sions.
Employ­ee Eli­gi­bil­i­ty Options for Employ­ers
  • 21 years old.
  • Have worked for the employ­er for at least three of the imme­di­ate­ly pre­ced­ing five years.
  • Have earned at least $600 (indexed for infla­tion) in com­pen­sa­tion.
Exclud­able Employ­ees Cer­tain union employ­ees or non-res­i­dent alien employ­ees.
Employ­er Con­tri­bu­tions Dis­cre­tionary annu­al­ly.
  • Max­i­mum is 20 per­cent of adjust­ed net busi­ness income or 25 per­cent of W-2.
  • Con­tri­bu­tion not to exceed $53,000.
Annu­al Cus­to­di­al Fee $18

SEP IRA Benefits

Employer Benefits

  • Employ­er con­tri­bu­tions to a SEP IRA Plan are tax deductible.
  • Earn­ings on employ­er con­tri­bu­tions are not tax­able to the cor­po­ra­tion.
  • Attract and retain qual­i­ty employ­ees.
  • Improved employ­ee morale, pro­duc­tiv­i­ty and employer/employee rela­tions.

Employee Benefits

  • Employ­er con­tri­bu­tions are not taxed until with­drawn from the plan.
  • Earn­ings on plan assets are not taxed until with­drawn from the plan.

What is a Profit Sharing Plan?

A Prof­it Shar­ing Plan is an employ­ee ben­e­fit plan estab­lished and fund­ed by a com­pa­ny. The employ­ee receives a share of com­pa­ny prof­its based on an agreed-upon for­mu­la.

Profit Sharing Plan at a Glance

Who May Estab­lish
  • All busi­ness types.
  • For prof­it and not-for-prof­it orga­ni­za­tions of any size.
Admin­is­tra­tor Test­ing Required annu­al­ly.
Estab­lish­ment New plans must be estab­lished by the employer’s fis­cal year end.
Employ­er Con­tri­bu­tions Employ­er dis­cre­tionary annu­al con­tri­bu­tion:
  • 25 per­cent lim­it.
  • 20 per­cent for sole pro­pri­etors and part­ner­ships.
  • Total max­i­mum of $53,000.
Vest­ing Sched­ules Employ­er con­tri­bu­tions may be sub­ject to a vest­ing sched­ule if elect­ed by the employ­er in the Plan Adop­tion Agree­ment.
Loan Fea­ture Yes, if employ­er elects on Plan Adop­tion Agree­ment.
Employ­ee Eli­gi­bil­i­ty Require­ments
  • One year with 1,000 hours of ser­vice (two years is avail­able with 100 per­cent imme­di­ate vest­ing only).
  • 21 years old.
Con­tri­bu­tions Due Employ­er con­tri­bu­tions due by the employer’s tax fil­ing due date, plus IRS-approved fil­ing exten­sion.

Profit Sharing Plan Benefits

Employer Benefits

  • Employ­er con­tri­bu­tions to a qual­i­fied plan are tax deductible for the busi­ness.
  • Plan earn­ings are tax deferred until with­draw­al.
  • Attract and retain qual­i­ty employ­ees.
  • Improved employ­ee morale, pro­duc­tiv­i­ty and employer/employee rela­tions.

Employee Benefits

  • Employ­er con­tri­bu­tions are tax deferred until with­drawn from the plan.
  • Earn­ings on plan assets are tax deferred until with­draw­al.

What is a Defined Benefit Plan?

A Defined Ben­e­fit plan is a qual­i­fied employ­er-spon­sored retire­ment plan that pays employ­ees a ben­e­fit at retire­ment based on an agreed-upon for­mu­la.

Defined Benefit Plan at a Glance

Who May Estab­lish
  • All busi­ness types.
  • For prof­it and not-for-prof­it orga­ni­za­tions of any size.
Admin­is­tra­tor Test­ing Required annu­al­ly.
Estab­lish­ment New plans must be estab­lished by the employer’s fis­cal year end.
Con­tri­bu­tions
  • Up to $210,000.
  • Employ­er con­tri­bu­tions manda­to­ry each plan year.
Vest­ing Sched­ules Employ­er con­tri­bu­tions may be sub­ject to a vest­ing sched­ule if elect­ed by the employ­er in the Plan Adop­tion Agree­ment.
Employ­ee Eli­gi­bil­i­ty Require­ments
  • One year with 1,000 hours of ser­vice.
  • 21 years old.

Defined Benefit Plan Benefits

Employer Benefits

  • Employ­er con­tri­bu­tions are tax deductible for the busi­ness.
  • Con­tri­bu­tion lim­its for the plan can be high­er than those made to a defined con­tri­bu­tion plan.
  • Plan earn­ings are tax deferred until with­drawn.
  • Attract and retain qual­i­ty employ­ees.
  • Improved employ­ee morale, pro­duc­tiv­i­ty and employer/employee rela­tions.

Employee Benefits

  • Dis­tri­b­u­tions may be eli­gi­ble for favor­able tax treat­ment.
  • All con­tri­bu­tions are made by the employ­er.

Types of Defined Benefit Plans

  • Fixed Ben­e­fit - Retire­ment ben­e­fits are deter­mined as a fixed per­cent­age of the participant’s com­pen­sa­tion.
  • Flat Ben­e­fit - Retire­ment ben­e­fits are deter­mined as a flat-dol­lar amount.
  • Unit Cred­it Ben­e­fit- Retire­ment ben­e­fits are deter­mined as a fixed per­cent­age of pay or flat-dol­lar amount for each year of ser­vice.
  • Cash Bal­ance - Retire­ment ben­e­fits are deter­mined by con­vert­ing a hypo­thet­i­cal cash bal­ance account to an annu­ity.