Retirement Plans: Qualified and Non-qualified

Qualified retirement plan

This form of retirement plan is one that is certified by the " Internal Revenue Code Section 401(a)" and the "Employee Retirement Income Security Act of 1974 (ERISA)" therefore it has more advantages regarding tax treatment, allowing employers to subtract yearly permissible contributions for every participating employee and the earnings on these contributions are "tax-deferred" until taken out for every participant; and some taxes may be deferred further by means of transferring into another different kind of IRA.

Let's look at what this can do for employers.

First of all it can Draw experienced employees into their company. It can also motivate and retain good employees. It encourages employees to set aside financial aid for future use or for retirement because the benefits of the Social Security alone are not enough to support a sensible way of living for retirees, and it can Protect plan assets from creditors.

Two main categories of "Qualified retirement plans"

1. "Defined benefit plans" are company retirement plans, like pension plans, where when an employee, on reaching retirement, will receive a specified amount that is usually based on his salary and number of years in the service, whereby the employer carries the full risk in investment. Both employer and employee, or just the employee alone, can contribute.

2. "Defined contribution plan". This type of plan outlines the amount that flows to employees and how much should be contributed by an employer each year to the retirement plan. It also keeps account balances of all members, and states that no member should receive an allotment greater than 25% of compensation or 30,000 dollars, (whichever is the lesser of the two) throughout any year.

"Non-qualified retirement plan"

These type of retirement plans do not meet requirements set by "Internal Revenue Code Section 401(a)" and the "Employee Retirement Income Security Act of 1974 (ERISA)". They are financed by employers therefore are flexible compared to "qualified retirement plans" but do not have the tax benefits that "qualified retirement plans" offer. Benefits, structured in annuities form, are paid generally at retirement age and are liable to "tax" just like "ordinary income tax"; or in "lump sum" or in a payment that may be transferred or converted into IRA, to suspend or defer taxes.

"Top-Hat plans" (THP), "Excess benefit plans" (EBP) and "Supplemental executive retirement plans" (SERP) are types of non-qualified and deferred compensation plans patterned to complement or enhance "qualified retirement plans".

"Non-qualified retirement plan" supplement "qualified retirement plans" by compensating the benefits that are unavailable to qualified plans and typically covers higher paid company employees. It may be non-funded or funded. The huge disadvantage with this plan is that there is no security promised to the employees in the event that the company should go into bankruptcy, or is sold to another company.

You must always know your options and should develop a plan way before your retirement. Pursuing professional investment advice will help you manage and synchronize your options with a complete and secure financial plan.

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529 Plan Help

529 college plans are state sponsored education savings accounts that permits non tax deferred contributions to be made for college education tuition expenses.

Each state will set their own limit for contributions into a 529 plan. The earnings in the investment plan account grow and are distributed tax free when they are used to pay for college or other qualified higher education instutions.

Saving for college can be very difficult for many people. With the cost of housing, taxes and other expenses growing with most people, having the 529 savings plan option can give a family a certain measure of comfort knowing they are saving for college. The amount of money that grows in the 529 will vary with the performance of the investments in the account.

Our financial advisors, planners and broker dealers can provide more information and open a savings plan for you or your child.

529 Savings Accounts

Defined Contribution Retirement Plan

A corporate retirement plan where the employee contributes a defined amount based on earnings or other factors. It is a tax qualified retirement plan. Eventual investment and retirement value of the account may be transferred or rolled over into another corporate plan.

These are different from defined benefit set ups where the amount put in by and for the employee is packaged with years of service, salary and other factors to calculate a monthly benefit. Contribution retirement accounts are taken out, transferred or people can do a rollover.

The years of service and amount of contributions will effect the account balance and asset allocations are a factor in the performance of the investments and rate of return. This is also true in defined benefit corporate retirement plans.

Contribution plans like 401k's and group IRA accounts are much more popular than benefit arrangements nowadays. With much of the workforce employed with small business or non union type companies, the need for providing a fixed monthly benefit at retirement and calculating that benefit over time is less appealing to a company when a 401k or other employee controlled plan is easier for the company.

403B 5500 Plan Document

5500

Beginning in 2009, all ERISA 403 plans must file a full form 5500 that recognizes all assets under the plan. Plans with greater than 100 participants must also meet the 5500 audit requirements and regulations. Contact us below if you have questions on this rule.

Plan Document

A plan document must be in place by the effective date of the regulations. This is an important change. If a 403 b already has a plan document, the retirement plan document must be reviewed to ensure the rules under final regulations are addressed.

Review Operations - Plan sponsors must go over their procedures so they align with what is in their new or existing 403 b plan. The regulations also call for oversight.

Non actively Sponsored Plan

Regulations provide that the account manager review the plan. These still may comply without subjecting them to ERISA. Developing a plan document and reviewing service providers for your 403b plan are included in the regulations compliance.

We are the premier training company for the financial industry. Contact us with any 403b administrator question.

403b Regulations

Estate Planning Help

Learn how to protect your estate (regardless of size) from probate and over taxation. American Investment Training of New York is a free training and expert referral provider of estate planning experts who can answer any question and provide estate planner protection and questions.

Our main goal is to show you how to avoid probate and show you ways to reduce your taxes so your heirs will receive the most value possible. Proper estate planning can save your estate up to 40% in many cases in taxes.

Avoiding Probate

One of the best things you can for yourself and your family is to set up a proper trust and have your estate plan in place to avoid the probate process (court decides in an open form) that can cause you to incur much higher taxes and have your "will" be an open book for all to see. We can show you how to avoid probate and provide the experts and education you need for proper estate planning protection and avoiding probate, courts and higher estate taxes.

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Estate Planning Help

403b planning

We are the premier training company for the financial industry. Contact us with any 403b administrator question.

Plan Owners and administrators - Ask Us With Your Questions

We are experts in the new 403 b rules and changes. You can contact us with any question or service related to any insurance or investment using our Company Retirement Plan Question Form.

Individuals (not companies) looking for 403 plan help or any other insurance and investment question can use our Investment or Insurance Help form

Or Contact Us Direct with any Question: 403b Plan Help - Free help from American Investment Training

Estate Planning Help - Estate Tax Questions

American Investment Training provides free assistance to individuals needing estate planning help and estate tax questions. This is a free educational and help site and company that can answer calculating estate value, reducing estate value to lessen death tax to you and your family and more.
Gift tax question help

All estate planning questions and help to include MANY areas of concern to most people looking to see how to avoid probate and make sure your assets are taxed at the very least possible.

Learn how to protect your estate (regardless of size) from probate and over taxation. American Investment Training is a free training and expert referral provider of estate planning experts who can answer any question and provide estate planner protection and questions.

Our main goal is to show you how to avoid probate and show you ways to reduce your taxes so your heirs will receive the most value possible. Proper estate planning can save your estate up to 40% in many cases in taxes.

Avoiding Probate

One of the best things you can for yourself and your family is to set up a proper trust and have your estate plan in place to avoid the probate process (court decides in an open form) that can cause you to incur much higher taxes and have your "will" be an open book for all to see. We can show you how to avoid probate and provide the experts and education you need for proper estate planning protection and avoiding probate, courts and higher estate taxes.

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