1. Building a Retirement Program for Business Presented by (Name, CPA) Member, The Ohio Society of CPAs 5/3/2015 1

2. Types of Retirement Plans Payroll Deduction IRAs SEPs SIMPLE IRAs 401(k) Plans Profit-Sharing Plans Money Purchase Plans Defined Benefit Plans 5/3/20152

3. Payroll Deduction IRA Available to any size business, even the self-employed Easy to set up and operate Low administrative costs Only your employees make contributions Employers are only responsible for transmitting the employee’s authorized deduction to the financial institution 5/3/20153

4. Simplified Employee Pension Plan (SEP) To establish a SEP, you: Can be a business of any size, even self-employed Must adopt a SEP plan document Generally can’t have any other retirement plan 5/3/20154

5. Simplified Employee Pension Plan (SEP) Advantages: Easy to set up and operate – usually just a phone call to a financial institution gets things started Low administrative costs Flexible annual contribution obligations – great if cash flow is an issue 5/3/20155

6. SIMPLE IRA Plan To establish a SIMPLE IRA plan: Have a business with, generally, 100 or fewer employees Complete 1-2 forms Can’t have any other retirement plan 5/3/20156

7. SIMPLE IRA Plan Advantages: Easy to set up and run – usually just a phone call to a financial institution gets things started Low administrative costs Employees can contribute, on a tax-deferred basis, through convenient payroll deductions Employers can match the employee contributions of those who decide to participate, or to contribute a fixed percentage of all eligible employees’ pay 5/3/20157

8. 401(k) Plans A 401(k) plan is a qualified profit-sharing, stock bonus, pre-ERISA money purchase pension or a rural cooperative plan. It allows employees to elect to have the employer contribute a portion of the employee’s cash wages to the plan on a pre-tax basis. 5/3/20158

9. 401(k) Plans Two of the tax advantages: Employer contributions are deductible on the employer’s federal income tax return as long as the contributions do not exceed the limitations described in section 404 of the Internal Revenue Code. Elective deferrals and investment gains are not currently taxed and enjoy tax deferral until distribution. 5/3/20159

10. 401(k) Plans There are several types of 401(k) plans available: Traditional 401(k) plans Safe harbor 401(k) plans SIMPLE 401(k) plans 5/3/201510

11. Traditional 401(k) Plans Employees make pre-tax deferrals through payroll deductions Employers have the option of making contributions Employers must perform tests to verify the program doesn’t discriminate in favor of highly compensated employees 5/3/201511

12. Safe harbor 401(k) Plans Similar to traditional 401(k) plans Provides for fully vested employer contributions Not subject to the complex annual nondiscrimination tests Employers must satisfy certain notice requirements 5/3/201512

13. SIMPLE 401(k) Plans Created for small businesses with 100 or fewer employees Provides for fully vested employer contributions Not subject to the complex annual nondiscrimination tests Employees eligible to participate in a SIMPLE 401(k) plan may not receive any contributions or benefit accruals under any other plans 5/3/201513

14. Profit Sharing Plans Allow for other retirement plans Are available to businesses of any size 5/3/201514

15. Profit Sharing Plans Pros and cons: Greater flexibility – contributions are strictly discretionary, good if cash flow is an issue Administrative costs may be higher than under more basic arrangements, though pre-approved plans are available that might cut costs 5/3/201515

16. Profit Sharing Plans Pros and cons: Must be careful that benefits do not discriminate in favor of highly compensated employees Employer contributions only 5/3/201516

17. Profit Sharing Plans Determining how contributions are divided Comp to Comp plan: Calculate sum of total employee compensation Determine what percentage is earned by each employee Use that percentage to distribute contributions 5/3/201517

18. Money Purchase Plans With a money purchase plan, employers: Must make a set contribution each year Can have other retirement plans Can be a business of any size Can use pre-approved money purchase plans to cut down on administrative costs 5/3/201518

19. Money Purchase Plans Pros and Cons: Can grow larger account balances than under some other arrangements Administrative costs may be higher than under more basic arrangements Need to test that benefits do not discriminate in favor of the highly compensated employees 5/3/201519

20. Money Purchase Plans Pros and Cons: An excise tax applies if the minimum contribution requirement is not satisfied Employer and/or employee can contribute 5/3/201520

21. Defined Benefit Plans Pros: Significant benefits possible in a relatively short period of time Employers can contribute (and deduct) more than under other retirement plans Plan provides a predictable benefit 5/3/201521

22. Defined Benefit Plans Pros: Plan can be used to promote certain business strategies by offering subsidized early retirement benefits Can be combined with other retirement plans Available for businesses of any size 5/3/201522

23. Defined Benefit Plans Cons: Must have an enrolled actuary determine the funding levels and sign the Schedule B Cannot retroactively decrease benefits Most costly type of plan Most administratively complex plan An excise tax applies if the minimum contribution requirement is not satisfied 5/3/201523

24. Additional Resources This information is adapted from the IRS Retirement Plans Community. For additional resources and forms, visit www.irs.gov/ep. 5/3/201524

25. For Further Information For further information or assistance with retirement plans, please contact me: –Name –Company –Address –E-mail –Phone 5/3/201525