For Small Business Owners. ADV 1499 ... In determining which plan is right for your business, consider ... there are no
simple retirement strategies
retirement planning strategies For Small Business Owners
Ameritas Life Insurance Corp. Ameritas Life Insurance Corp. of New York ADV 1499 2-17
Minimizing uncertainty and maximizing life. That’s our calling at Ameritas®. We can help you create a strategy to protect against the unexpected while ensuring the future of your business. We’ll help you prepare a retirement savings strategy that is flexible, inexpensive and simple. Both Simplified Employee Pension (SEP-IRA) and Savings Incentive Match Plan for Employees (SIMPLE-IRA) can help reduce administration and expenses of retirement savings for your business.
a SEP-IRA or SIMPLE-IRA can help you: • accumulate wealth for retirement • attract and keep quality employees • accumulate tax savings
retirement planning SEP-IRA and SIMPLE-IRAs offer the following benefits for your business: • Cost-Effective. You can skip costly and timeconsuming paperwork since reporting and disclosure requirements under ERISA simply do not apply. • Flexible. You can decide when to contribute to the plans since fixed annual contributions are not required. Thus, contributions can align with your business objectives. • Tax-Favored. Your employees will receive taxdeductible contributions since contributions and earnings are excluded from their taxable income. And they accumulate tax-deferred until benefit payments are received. They will receive greater economic value without current taxation.
The Right Plan In determining which plan is right for your business, consider the following: • Are you the only employee? If your earnings are $100,000, for example, a SEP-IRA allows you to contribute up to $25,000; or consider a SoloPlusSM Plan, which is 401(k) Plan for solo business partners, so you can contribute as much as $54,000. • Does your payroll mostly comprise a few key employees? If so, a SEP-IRA may be the right choice, because contributions are uniform with respect to salary. For example, if your salaries represent 75% of total payroll, including non-key employees, then your accounts can receive 75 cents of every dollar contributed by your business under the SEP-IRA. • Do non-key employees represent a substantial portion of your total payroll? A SIMPLE-IRA permits you to contribute up to $12,500 (plus matching) to your own account, or a Safe-Harbor 401(k) allows you to contribute up to $18,000 (plus matching), while you make limited employer matching contributions only for eligible employees who elect to make contributions themselves.
• Are you concerned about administrative expenses? You save on administrative fees with SEP-IRA and SIMPLE-IRA plans because there are no IRS employer filing requirements to meet. What’s more, such plans may be established using IRS-provided model plan documents. By contrast, employers who sponsor SoloPlusSM plans (when plan assets total more than $250,000) or Safe Harbor Feature
401(k) plans, which are generally purchased from a professional plan administrator, must annually file reports with the IRS. • Did the tax year end before you established any retirement plan? If so, it may not be too late to consider establishing a SEP-IRA and making—and tax-deducting—the employer contribution for the previous year before you file your company’s tax return. SoloPlusSM
SIMPLE IRA
SEP-IRA
Maximum eligibility requirements that may be imposed
Employees earning $5,000 in any prior 2 years and who are expected to earn $5,000 in current year
Employees working in 3 of the 5 prior years who are 21 years of age or older and received at least $600 in compensation
Not applicable
Employees with 1 year of service of 1,000 hours and 21 years of age or older
Maximum employee contribution
$12,5001
Salary reduction contributions not permitted in plans established after 1996.
$18,0001 of earned income
$18,0001 of earned income
Age 50 “catch-up” elective contribution
$3,0001
Same amounts as for 401(k) $6,0001 plan, but permitted only in salary reduction plans established before 1997
Maximum employer contribution
$12,5001
25% of compensation (20% for self-employeds) up to contribution limit of $52,000 (less employeeelective deferrals)1,2,3
Up to 25% of pay (20% for Up to 25% of pay (20% self-employed), maximum for self-employed), $54,0001,3,5 maximum $54,0001,3,5,6
Matching contributions required from employer
100% match on 1%-3% of employee’s compensation.4
Not applicable
Not applicable
100% matching on up to 4%, effectively, of employee’s compensation2
Alternative to matching
2% of compensation2 for all eligible employees
Not applicable
Not applicable
Qualified nonelective contribution equal to 3% of compensation for all non-highly compensated employees2
Vesting schedule
100% immediately
100% immediately
100% immediate vesting
100% immediate vesting7
Minimum coverage and participation requirements
No
All eligible employees must No participate
Yes
Participant Loans
No
No
Yes
Yes
IRS Reporting
No
No
Not required until plan assets exceed $250,000
Yes
IRS Model Plan
Yes. Form 5304-SIMPLE
Yes. Form 5305-SEP
No
No
Distributions before Permitted; 25% separation from penalty first 2 years8 employment (10% penalty may apply to distributions before age 59 ½ except death, disability, etc.)
Permitted
Not permitted except for hardship, death, or disability
Not permitted except for hardship, death, or disability
Company Size
Not limited
SoloPlusSM not available to companies with other employees besides owner (and spouse)
Not limited
100 or fewer employees earning at least $5,000 in previous year
Safe Harbor 401(k)
$6,0001
Ameritas Life Insurance Corp. Ameritas Life Insurance Corp. of New York
1
Add COLA (cost of living adjustment) for years after 2017. Maximum compensation considered $270,000, adjusted for COLA. 3 The plan sponsor’s accountant should be consulted for an earned income calculation. 4 Selected percentage is declared annually; 3% is required on a rolling basis 3 out of 5 years. 5 Salary deferral contributions (except age 50 catch-ups) are also counted toward the $54,000 limit. 6 Matching may not be applied to deferrals in excess of 6% of compensation. 7 100% immediate vesting on employer safe harbor and employee contributions. 8 The penalty is 10% on distributions before age 59 1/2 when made after 2 years of participation. 2
The information presented here is not intended as tax or other legal advice. For application of this information to your specific situation, you should consult an attorney. Contact your representative for more information and assistance in obtaining life insurance and other products to help meet your financial planning needs. This information is provided by Ameritas®, which is a marketing name for subsidiaries of Ameritas Mutual Holding Company, including, but not limited to: Ameritas Life Insurance Corp., 5900 O Street, Lincoln, Nebraska 68510; Ameritas Life Insurance Corp. of New York, (licensed in New York) 1350 Broadway, Suite 2201, New York, New York 10018; and Ameritas Investment Corp., member FINRA/SIPC. Each company is solely responsible for its own financial condition and contractual obligations. Ameritas® life insurance companies are not fiduciaries under the federal Employee Retirement Income Security Act or Internal Revenue Code Section 4975. For more information about Ameritas®, visit ameritas.com. Ameritas® and the bison design are registered service marks of Ameritas Life Insurance Corp. Fulfilling Life® is a registered service mark of affiliate Ameritas Holding Company. © 2017 Ameritas Mutual Holding Company
