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For over thirty years, The Lafayette Life Insurance Company has provided pension services to the small business market. We offer convenient, one provider service for plan design, document services, administrative services, funding options, and distribution planning.
A 412(e)(3) Fully Insured Defined Benefit Plan is a retirement plan that provides guaranteed retirement benefits to the owners and employees of a company provided annual premium has been paid. The plan is funded solely with annuity contracts or a combination of life insurance and annuities.
A Defined Benefit Plan is a retirement plan that provides guaranteed retirement benefits to the owners and employees of a company. The plan may be funded with, but not limited to, life insurance and annuity contracts.
A Cash Balance Plan is a defined benefit plan that provides benefits to participants in the form of hypothetical account balances normally stated as a dollar amount or a percentage of compensation. Each year, eligible participants receive their benefit in the form of a pay credit and an interest credit that is added to their hypothetical account. However, the plan is still funded like a traditional defined benefit plan with funds going into a pooled account.
A 401(k) Profit Sharing Plan allows employees to defer a portion of their income (tax deferred) to the plan while also allowing the employer to fund a matching and/or discretionary contribution. The salary deferrals are always 100% vested. They are limited to the lesser of 100% of the employee’s compensation or the current year’s dollar limit. Participants age 50 or older may make an additional “catch-up” deferral. These dollar limits are adjusted for cost-of-living increases.
A matching contribution by the employer may be included based on the salary deferrals. The matching allocation formula varies according to the employer’s funding objectives and may be discretionary. Highly compensated employees’ deferral amounts and matching amounts may be impacted by the deferral amount and matching amounts contributed by non-highly compensated employees.
A Safe Harbor 401(k) Profit Sharing Plan is designed to eliminate the nondiscrimination testing imposed on traditional 401(k) Plans and allows every participant to defer up to the maximum limits. In order to satisfy the “safe harbor” rules, the employer must make a 100% vested “safe harbor” contribution with one of the following two options: a 3% of compensation contribution to all eligible employees or a matching formula equal to 100% of salary deferrals up to 3% of compensation and 50% of salary deferrals between 3 and 5% of compensation. Retirement benefits are impacted by investment returns.
A Profit Sharing Plan is a defined contribution plan in which the employer makes discretionary contributions. A key advantage is flexibility in determining the annual contribution. The maximum annual employer deduction for contribution is 25% of eligible compensation. There is also a maximum individual contribution limit. The individual limits are adjusted for cost-of-living increases. There are three types of Profit Sharing Plans: Cross-tested, Age-weighted and Traditional.
Lafayette Life Insurance Company provides services to pension plans as outlined in a separate Administrative Services Agreement, and issues life insurance and annuity products that may be used as funding options. Lafayette Life does not serve as plan administrator, nor does Lafayette Life or its representatives provide ERISA, legal or tax advice. The client’s personal or legal tax advisors should always be consulted and relied upon for advice.