Employer Sponsored Retirement Plans

Your employees deserve a sense of security and confidence about their retirement. The Griggers Wealth Management team can help you compare plans and select the one most beneficial for you and your employees.

Defined Benefit Plans

Defined benefit plans guarantee a specified benefit your employees will receive when they reach retirement age. Using a formula to calculate the employee’s tenure and salary, a monthly payment is issues to the retired participant for the rest of their life. The employer is responsible for allocating the account’s investments. Examples of defined benefit plans and their payouts include:

Pension
Single or Joint Annuity
Lump-Sum

Defined Contribution Plans

Defined contribution plans give investment control to the employee. Each month, a percentage of pay is allocated to the account, and employees can allocate their investments as aggressively or conservatively as they wish.

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Compare Retirement Plans

Simple IRA

401(k)

SEP-IRA

Overview

Separate IRA for each participant
Employer contributions are not taxable to employee and earnings accumulate tax deferred
Most plans are employee-directed, meaning allocating investments and associated risks fall on the employee

Employer contributions are not taxable to employee and earnings accumulate tax deferred
Most plans are employee-directed, meaning allocating investments and associated risks fall on the employee

Separate IRA for each participant
Employer contributions are not taxable
Earnings accumulate tax-deferred
Most plans are employee-directed, meaning allocating investments and associated risks fall on the employee

Contributions

Employees can elect to defer a percentage of their salary
Pre-taxed contributions lower taxable income
Elective contributions are matched to 3%

Employee elects to defer a portion of their salary
Amounts deferred are not subject to current income tax
Elective contributions are matched at a set percentage, on a per plan basis

Employee Contributions are limited to the lesser of 25% of income or an annually-fixed amount
Employer Contributions are limited to the lesser of 20% of income or an annually-fixed amount

Early Withdrawal

25% penalty tax on withdrawals before age 59 ½
There are some exceptions to penalties
Earnings and contributions are taxed as ordinary income in the year received

A 10% penalty generally applies if withdrawals are made before age 59 ½
Employee elective contributions can be withdrawn for financial hardship

A 10% penalty generally applies if withdrawals are made before age 59 ½
Earnings and contributions are taxed as ordinary income in the year received

Retirement

Distributions must begin by April 1 of the year following the year the owner turns 72
Required minimum distribution rules applied
Earnings and contributions are taxed as ordinary income when received

Distributions must start on a specified date
Funds can be distributed as lump sum and periodic payments
Earnings and contributions are taxed as ordinary income when received

Distributions must begin by April 1 of the year following the year the owner turns 72
Required minimum distribution rules applied
Earnings and contributions are taxed as ordinary income when received

Death

IRA value is included in gross estate
Can pass proceeds to beneficiaries in varying time periods
Income and estate taxes can severely reduce IRA funds if left to a non-spousal beneficiary

401(k) value is included in gross estate
Can pass proceeds to beneficiaries in varying time periods
Income and estate taxes can severely reduce 401(k) funds if left to a non-spousal beneficiary

IRA value is included in gross estate
Can pass proceeds to beneficiaries in varying time periods
Income and estate taxes can severely reduce IRA funds if left to a non-spousal beneficiary

Simple IRA

Overview

Separate IRA for each participant
Employer contributions are not taxable to employee and earnings accumulate tax deferred
Most plans are employee-directed, meaning allocating investments and associated risks fall on the employee

Contributions

Employees can elect to defer a percentage of their salary
Pre-taxed contributions lower taxable income
Elective contributions are matched to 3%

Early Withdrawal

25% penalty tax on withdrawals before age 59 ½
There are some exceptions to penalties
Earnings and contributions are taxed as ordinary income in the year received

Retirement

Distributions must begin by April 1 of the year following the year the owner turns 72
Required minimum distribution rules applied
Earnings and contributions are taxed as ordinary income when received

Death

IRA value is included in gross estate
Can pass proceeds to beneficiaries in varying time periods
Income and estate taxes can severely reduce IRA funds if left to a non-spousal beneficiary

401(k)

Overview

Employer contributions are not taxable to employee and earnings accumulate tax deferred
Most plans are employee-directed, meaning allocating investments and associated risks fall on the employee

Contributions

Employee elects to defer a portion of their salary
Amounts deferred are not subject to current income tax
Elective contributions are matched at a set percentage, on a per plan basis

Early Withdrawal

A 10% penalty generally applies if withdrawals are made before age 59 ½
Employee elective contributions can be withdrawn for financial hardship

Retirement

Distributions must start on a specified date
Funds can be distributed as lump sum and periodic payments
Earnings and contributions are taxed as ordinary income when received

Death

401(k) value is included in gross estate
Can pass proceeds to beneficiaries in varying time periods
Income and estate taxes can severely reduce 401(k) funds if left to a non-spousal beneficiary

SEP-IRA

Overview

Separate IRA for each participant
Employer contributions are not taxable
Earnings accumulate tax-deferred
Most plans are employee-directed, meaning allocating investments and associated risks fall on the employee

Contributions

Employee Contributions are limited to the lesser of 25% of income or an annually-fixed amount
Employer Contributions are limited to the lesser of 20% of income or an annually-fixed amount

Early Withdrawal

A 10% penalty generally applies if withdrawals are made before age 59 ½
Earnings and contributions are taxed as ordinary income in the year received

Retirement

Distributions must begin by April 1 of the year following the year the owner turns 72
Required minimum distribution rules applied
Earnings and contributions are taxed as ordinary income when received

Death

IRA value is included in gross estate
Can pass proceeds to beneficiaries in varying time periods
Income and estate taxes can severely reduce IRA funds if left to a non-spousal beneficiary

This information is not intended as authoritative guidance or tax or legal advice.

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