tailieunhanh - Lecture Employee benefits and retirement planning - Chapter 21: Cross-tested age-weighted plans

This chapter discusses age-weighted defined contribution plans, specifically focusing on the cross-tested variety. The section on when such a plan is indicated highlights its use for older business owners and key employees. Following this section, the chapter touches on advantages and disadvantages. | What is it? a defined contribution plan allocation that allows higher plan contributions for older plan entrants the formula for annual employer contributions or allocations to participant accounts is based on AGE as well as compensation level older plan entrant’s accounts build up quickly tends to favor owners and key-employees Copyright 2009, The National Underwriter Company Plan Types cross tested (new comparability plan) maximizes benefits to highly compensated employees (HCEs) benefits to non-HCEs are whatever is necessary to meet nondiscrimination regulations Copyright 2009, The National Underwriter Company Plan Types age-weighted profit sharing plan allocation formula contains actuarial age-weighting factor that gives a higher allocation for older plan entrants target plan pension plan with an age-weighted formula but requires annual contributions Copyright 2009, The National Underwriter Company When is it indicated? relatively older business owners and key employees want to maximize own plan benefits minimize plan costs 2. employer wants to bring older employees into a defined contribution plan Copyright 2009, The National Underwriter Company When is it indicated? want plan that provides adequate retirement benefits to older employees with lower cost and simplicity of a defined contribution plan when employer terminates existing defined benefit plan and wants to provide approximately the same benefits to most employees closely held business or professional corporation has older key employees Copyright 2009, The National Underwriter Company Advantages can maximize retirement benefits for employees entering plan at older ages older business owners and key employees may receive a larger portion of plan allocations as compared with other defined contribution plans provides tax-deferred savings for employees simple and inexpensive to design, administer, and explain to employees Copyright 2009, The National Underwriter Company Advantages . | What is it? a defined contribution plan allocation that allows higher plan contributions for older plan entrants the formula for annual employer contributions or allocations to participant accounts is based on AGE as well as compensation level older plan entrant’s accounts build up quickly tends to favor owners and key-employees Copyright 2009, The National Underwriter Company Plan Types cross tested (new comparability plan) maximizes benefits to highly compensated employees (HCEs) benefits to non-HCEs are whatever is necessary to meet nondiscrimination regulations Copyright 2009, The National Underwriter Company Plan Types age-weighted profit sharing plan allocation formula contains actuarial age-weighting factor that gives a higher allocation for older plan entrants target plan pension plan with an age-weighted formula but requires annual contributions Copyright 2009, The National Underwriter Company When is it indicated? relatively older business owners and key .