Plan Types

412(e)(3) Fully Insured Defined Benefit Plan

The Plan’s annual contribution is determined by solving for a guaranteed lump sum amount that will be sufficient to provide a desired monthly income at retirement. The monthly retirement benefit is a function of income and has statutory limitations that change annually. The plan is funded solely with annuity contracts or a combination of life insurance and annuities. The minimum guarantees provided by the insurance contracts helps ensure income at retirement.

Reasons to adopt a 412(e)(3) Fully Insured Defined Benefit Plan for your business:

Considerations when adopting a Fully Insured Defined Benefit Plan:

Defined Benefit Plan

The Plan’s annual contribution is determined by solving for a lump sum amount that will be sufficient to provide the defined monthly income at retirement. The monthly retirement benefit is a function of income and has statutory limitations that change annually. The defined benefit plan may be funded with, but not limited to, life insurance and annuity contracts.

Reasons to adopt a Defined Benefit Plan for your business:

Considerations when adopting a Defined Benefit Plan:

Cash Balance Plan

The plan 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.

401(k) Profit Sharing Plan

The 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 percent vested. They are limited to the lesser of 100 percent 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 thresholds are adjusted for cost-of-living increases.

A matching contribution may be included based on the salary deferrals. The matching allocation formula varies according to the employer’s funding objectives and may be discretionary.

Reasons to adopt a 401(k) Profit Sharing Plan for your business:

Considerations when adopting a 401(k) Profit Sharing Plan:

401(k) Safe Harbor Profit Sharing Plan

The plan is designed to eliminate the nondiscrimination testing imposed by traditional 401(k) plans and allow 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 three percent of compensation contribution to all eligible employees or a matching formula equal to 100 percent of salary deferrals up to three percent of compensation and 50 percent of salary deferrals between three and five percent of compensation.

Reasons to adopt a 401(k) Safe Harbor Plan for your business:

Considerations when adopting a 401(k) Safe Harbor Plan:

Profit Sharing Plan

The 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 percent of eligible compensation. There is also a maximum individual contribution limit. The individual limits are adjusted for cost-of-living increases.

Types of Profit Sharing Plans include:

Reasons to adopt a Profit Sharing Plan:

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.

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