Blueprint For Your Retirement

Pre-Retirement Protection

Shielding your unspent qualified plan accumulations from unnecessary loss caused by unexpected events, including pre-retirement death, is an important consideration. The Internal Revenue Service has provided rules that define the maximum protection against mortality loss that can be legally acquired by your qualified retirement plan. Qualified plan funds, allocated to fixed premium life insurance contracts that are specially designed for this purpose, can be purchased under these rules.

There is a minimal cost for this benefit since the qualified plan funds allocated for this purpose earn a rate of return specified in the insurance contract. Inclusion of life insurance in your plan will protect your family and your employees’ dependents in the event of pre-retirement death. If the policy goes unused, the cash accumulations in the insurance contract within the qualified plan become available for retirement spending.

Your Qualified Plan Options

Defined Contribution (DC) Plans

Defined contribution plans provide an individual account for each participant. The individual accounts can be managed separately for each employee, or managed in a single account with each participant’s percentage tracked by Cetera Retirement Plan Specialists pension professionals. Employer contributions, investment gains or losses, plan income or expenses, and forfeitures of accounts of unvested or partially vested terminated participants are allocated to these individual accounts. When a participant retires or terminates employment, the benefit payable to him/her is the vested portion of the account balance.

Profit Sharing Plans

These plans provide maximum flexibility, as a specified contribution is not required each year and the employer may vary the contribution annually. The maximum contribution is 25% of total eligible compensation and the maximum allocation to an individual is the lesser of either 100% of plan compensation or $53,000. If it is determined that a 401(k) feature will enhance the plan’s efficiency, the plan can be designed to allow employees, including the owner and owner’s spouse (if employed by the business) to make 401(k) deferrals, which may allow additional savings up to $18,000 in 2016 if under age 50, or $24,000 if over age 50.

• Safe Harbor — allocates employer contributions uniformly to all eligible participants as a percentage of their plan compensation
• Integrated — maximizes proportion of employer contributions to higher paid employees via integration with Social Security
• Cross-Tested, New Comparability or Tiered Allocation — allow different levels of contributions to be allocated to different groups of employees (e.g., by job title, salary, etc.), with each participant’s contribution converted to a benefit paid at retirement

Defined Benefit (DB) Plans

Defined benefit plans provide a monthly benefit beginning at retirement and payable until death. The amount is based on years of service and earnings during the highest three consecutive years of employment while participating in the plan, with a maximum annual benefit is currently $210,000 as of 2016.

These plans provide employers with the potential for much greater savings opportunities than defined contribution plans. Defined benefit plan sponsors can maximize contributions by providing an insured death benefit under IRS incidental benefit limits. These specially designed life insurance contracts protect participants from premature death, with the cash value of the policies funding retirement benefits.

An employer can maintain both a defined benefit plan and a profit sharing plan at the same time and maximize contributions as long as no employees are included in both plans. In addition, an employer can allow participants in a defined benefit plan to make elective deferrals into a 401(k) account maintained within a profit sharing plan.

Is a Qualified Retirement Plan Appropriate for You?

Qualified retirement plans enable Fortress Financial Strategies clients to save earned income that is not subjected to current taxation. In addition, earnings on savings within these plans are not subjected to current income or capital gains taxation. Qualified retirement plans are efficient savings vehicles if:

• Employee and administrative costs are at least 10% less than the income taxes you would pay if you paid the plan contributions to yourself as salary
• Employee costs do not exceed approximately 40% of the total plan contribution
• Your retirement, career goals and cash flow allow for at least a 5-year plan

Ask Fortress Financial Strategies to complete a Pension Feasibility Study today to help you determine how to save tax-deductible dollars (or possibly more tax-deductible dollars) toward your retirement by utilizing an IRS-Approved qualified pension plan.