Comparing Plan Types

Determine the Plan Type that’s Right for You

The chart below provides a quick comparison of different types of qualified retirement plans. For a more detailed presentation of the features and benefits of these plans, please visit our website at www.julyservices.com or let us show you how one may be best suited for your situation with a custom plan illustration.

Type of Plan BENEFITS LIMITATIONS TYPICAL PLAN SPONSOR
SOLO 401k Plan
  • For owner-only businesses
  • Up to $58,000 / $64,500 if age 50
  • Spouses can be included
  • Partners in a partnership
• 25% deduction limit Owner-Only business. Incorporated or unincorporated.
Traditional 401(k) Plan
  • Employee deferrals permitted
  • Discretionary matching contributions
  • Discretionary Profit Sharing
  • Up to 1 year eligibility period
  • Vesting schedules
  • ADP test may limit HCE deferrals
  • 25% deduction limit for employer contributions
(excluding deferrals)
  • Possible required contributions
Employers wishing to provide employees with
the ability to fund their own retirement accounts.
Safe Harbor 401(k) Plan
  • Same as Traditional 401(k) Plans
  • Not subject to the ADP Test
  • Employees can contribute $19,500
  • Permit discretionary contributions
  • Required, fully-vested contributions (usually a 3%
contribution for eligible employees)
  • 25% deduction limit for employer contributions (excluding deferrals)
Employers wishing to provide employees with
the ability to fund their own retirement accounts.  Also good for companies where participation is low.
Traditional
Profit Sharing
  • Discretionary contributions
  • Unlimited investment choices
  • Vesting schedules
  • Low setup / administration costs
  • Up to 2 year eligibility period
  • 25% deduction limit
  • High funding costs
  • No employee deferrals
  • Possible required contributions
Employer needing tax deductions and wishing to provide equal
contributions to all employees
New  
Comparability  
Plan
  • Maximizes contributions for HCEs
  • Up to $58,000 contributions for HCEs
  • Discretionary contributions
  • Vesting schedules
  • Up to 2 year eligibility period
  • Can be a stand-alone Profit Sharing Plan or part of a traditional or Safe Harbor 401(k) Plan
  • 25% deduction limit
  • No employee deferrals
  • Will not work for employers with younger Highly
Compensated Employees 		Employer needing tax deductions and wishing to maximize
contributions for Highly
Compensated Employees and business owners
Cash Balance Plans
  • Much larger contributions
  • Annual benefit of up to $230,000
  • Participants have hypothetical account unlike DB Plan
  • Contributions can be less volatile than DB 
• Higher cost of administration
Employer with high, steady income.
Defined
Benefit Plan
  • Much larger contributions
  • Annual benefit of up to $230,000
  • Higher cost of administration
  • Volatile required contributions
Employer with high, steady income. 
Owners age 50 and up.

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Categories

Cash Balance | Cash Balance Article | Employee Articles | Employees

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