TYPES OF PLANS

Once we’ve determined that a pension or profit sharing plan is appropriate and feasible for your company, we’ll help you choose from the following types:

Defined Benefit Plan .. A plan that is designed to provide participants with a definite benefit at retirement (for example, a monthly benefit of 20% of compensation upon reaching age 65). Contributions under the plan are determined by reference to benefits provided, not on the basis of a percentage of compensation.

Profit Sharing Plan .. A defined contribution plan under which the employer agrees to make discretionary contributions (usually out of profits). A participant’s retirement benefits are based on the amount in his or her individual account at retirement.

401(k) Plan .. A qualified profit sharing plan that gives a participant an option to take cash or to have the employer contribute that money towards the employee’s retirement.

Money Purchase Pension Plan .. A defined contribution plan under which the employer’s contributions are mandatory and are based on each participant’s compensation. Retirement benefits under the plan are based on the amount in the participant’s individual account at retirement.

Employee Stock Ownership Plan (ESOP) .. A defined contribution plan designed to invest primarily in the stock of the sponsoring employer. ESOPs are “qualified” in the sense that the ESOP’s sponsoring company, the selling shareholder and participants receive various tax benefits. ESOPs are often used as a corporate finance strategy and are also used to align the interests of a company’s employees with those of the company’s shareholders.

 

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