Retirement Plans

Non-Safe harbor 401(k)s are popular with small businesses because they do not require a company to make mandatory employer contributions. However, Non-Safe Harbor plans will require annual compliance testing including ADP/ACP to ensure they are not top-heavy (meaning that compensating some employees more than others).

A Profit Sharing 401(k) is another type of defined contribution plan in which the company has discretion to determine when and how much the company pays into the plan. A Profit-Sharing Plan is a popular incentive for retaining employees and contributions may be subject to a vesting schedule of either 100% vested, three- year cliff or a 6-year graded vesting schedule.

A 403(b) plan, sometimes referred to as a "tax-sheltered annuity", is a qualified retirement plan available to public schools, tax exempt organizations, and certain religious organizations. Like a 401(k) plan, a 403(b) plan must also file a Form 5500 at the end of the plan year, plans with more than 100 participants must have an independent audit, and it can have vesting and eligibility requirements on employer contributions. However, a 403(b) plan must maintain a "universal availability" standard of eligibility for employee deferrals, which means that employees must be able to immediately participate in the plan and all elective deferrals are 100% immediately vested. Because of that universal availability feature, 403(b) plans do not need to undergo discrimination testing.

In a Payroll Deduction IRA, an employee establishes either a Traditional or Roth IRA with a financial institution and then authorizes the payroll deduction for the IRA. The employer's responsibility is to transmit the employee's authorized deduction to the financial institution. Some States have enacted or implemented auto IRA programs and many more are considering doing so in the not-so-distant future.