Plan Types

Qualified Plans

The IRS has created a number of retirement savings vehicles for employers of all sizes to use to save for their and their employees’ retirement.

A qualified plan must meet a number of Internal Revenue Code requirements under Section 401(a) such as minimum coverage, benefits, participation, and vesting to name a few.

In return, the IRS provides the following tax advantages when businesses set up plans:

  • Deductions for current contributions
  • Tax deferred earnings on investments until distribution
  • Employees may have opportunity to make pre tax or after-tax contribution
  • Deduction for ongoing plan expenses
Man looking over Qualified Plans: IRS retirement savings vehicles

In addition to tax benefits, qualified retirement plans have the following advantages:

  • Attract talented employees with a great benefit package
  • Retain valued employees by rewarding their service
  • Disciplined savings tool to help employees meet retirement needs
  • Significant savings accumulation in a short period of time
  • Protection from creditors

Qualified plans fall into two basic types of retirement plans: DC (Defined Contribution) and DB (Defined Benefit) plans.

Below is a brief overview of some of the plan designs that our consultants will customize to best fit for your needs.


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Plan Types

Defined Contribution Plans

Defined Contribution Plans operate, per their name, with a “defined contribution” or determinable amount allocated to eligible employees.

These contributions along with any earnings are maintained in an account (either pooled or segregated) for each employee’s benefit. Contributions to the plan may consist of pre-tax employer and/or pre-tax and/or post-tax employee contributions.

The ultimate retirement benefit or benefit upon distribution of each participant will be dependent on the contributions and earnings experienced by the account, with investment control either by the employer or by the employee. For this reason, the future retirement benefit cannot be determined or guaranteed.

Employer contributions may be subject to a vesting schedule. Non-vested account balances forfeited by former employees can be used to reduce employer contributions or be reallocated to active participants.

Man pointing at employee retirement savings

For 2023, an employee’s contributions to the plan may not exceed $22,500 (or $30,000 for employees age 50 or over). 

The employer contribution, when combined with the employee contribution may not exceed the lesser of $61,000 for 2022 and $66,000 for 2022 or 100% of an employee’s compensation. The company may make a deductible plan contribution up to 25% of the overall eligible payroll. 

The maximum eligible compensation that can be considered for any single employee is $305,000 in 2022 and $330,000 in 2023.

Defined Contribution Plan Types

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Plan Types

Defined Benefit Plans

Defined Benefit Plans operate, per their name, with a “defined benefit” provided to employees at retirement. 

On an annual basis, an actuary determines a minimum required, maximum allowed, and recommended contribution for the employer based on the current plan assets when compared to the current plan liabilities to meet projected retirement benefits. The responsibility for funding the individual liabilities lies with the employer who invests all of the overall plan assets. Investment gains/losses will not affect participants’ benefits, but may require smaller or larger contributions by the employer.

Defined Benefit Plans are often appealing to employers who are looking to contribute more than that $66,000 maximum defined contribution limit. 

In a DB Plan, the maximum benefit that can be funded for is the lesser of $265,000/yr at retirement or 100% of highest 3 year average compensation. 

Substantial deductible contributions are allowed to be made to the plan in order to create a large enough funding source to fund the accrued benefits.


Woman reviewing options of Defined Benefit plan

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