Defined Contribution Plans
- Employee and Employer contributions
- Maximum annual contribution: $55,000 or 20% of compensation (based on $275,000 maximum salary) for 2018.
- Vesting schedules available when using a maximum of one-year of service for eligibility requirements
Owner-Only or Solo 401(k) Plans
- Any type of business entity can establish as long as there are no eligible employees, except a spouse.
- Participant(s) can make the maximum pre-tax employee deferrals or ROTH deferrals AND Company contributions.
- Eligible employees can make pre-tax employee deferrals to the Plan. Sometimes, this is the only contribution to the Plan, as the Employer is not required to make a contribution.
- If the Plan allows, eligible employees can make after-tax ROTH contributions to the Plan.
- If the Employer does choose to make contributions to the Plan, they may be small and can be subject to vesting (depending on the type of contribution).
- Employer may choose to make Safe Harbor, Profit Sharing and/or Employer Matching contributions to the Plan.
- Safe Harbor contributions are 100% vested, while the Employer can set a vesting schedule for Profit Sharing and Employer Matching contributions.
- There are different Profit Sharing options possible, as is illustrated on some of the following pages.
- Primarily for non-profit entities, such as churches, schools, etc.
Employer Stock Ownership Plans (ESOP’s)
- Invests primarily in the stock of the company sponsoring the Plan.
Money Purchase or Target Benefit Plans
- Employer makes fixed contributions.
- Employees CANNOT contribute.