Retirement Plans There are two main types of retirement plans: Defined Benefit and Defined Contribution. We help clients establish both of these plans through various custodians and using different types of investments, depending on what is best suited for them.Defined Benefit PlansA defined benefit plan is a retirement plan where the employer contributes an actuarially determined amount sufficient to pay each participant a fixed or defined benefit. Contributions are tax deductible to the employer and are not currently taxable to the employee. The employer assumes the investment risk and earnings accumulate income tax-deferred. Benefits in this type of plan are guaranteed for the employee at retirement.Defined Contribution PlansThere are several types of these plans. Here are a few of the most common:401(k) - A retirement plan where the employee contributes a percentage of their salary, up to a maximum limit, and chooses the investments based on what is offered in the plan. The employee bears the investment risk. Employers can make matching contributions up to certain limits. There are tax benefits to both the employee and employer in this type of plan. The employee contributions are income tax-deferred and employer contributions are tax deductible.Profit Sharing Plan – Employer contributes a percentage of the employee’s salary each year. The contribution is not required to be made by the employer and the percentage can change from year to year, allowing the employer flexibility in funding the plan.SIMPLE (Savings Incentive Match Plan for Employers) - This type of plan can either be in an IRA or 401(k) format. The employer is required to fund a minimum of 2% of the employee’s salary each year.SEP (Simplified Employee Plan) – This plan is made up of a either a single IRA (sole practitioner) or group of IRAs if there are employees of the firm. Both the employer and the employee can contribute to the IRA. This type of plan allows for a higher level of funding each year than a Traditional or Roth IRA.