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Profit Sharing Plans |
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Extremely Flexible. |
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Low administrative costs. |
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Contributions can be completely discretionary. |
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Maximum contribution is 25% of total compensation of eligible employees. |
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No minimum contribution. |
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Best suited for companies that want maximum flexibility. |
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Money-Purchase Plans |
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Are less flexible than profit sharing plans. |
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Have low administrative costs. |
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Require yearly set contributions. |
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Limit maximum contributions to 25% of eligible employees' compensation. |
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401(k) Plans |
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Have maximum Flexibility. |
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Have relatively high administrative costs. |
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Don't require contributions. |
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Have a maximum allowable employee contribution of $15,500 in 2007 [$20,500 including catch-up contributions if over age 50 (indexed for inflation)]. Employers can make matching contributions. |
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Don't require minimum contributions. |
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Defined Benefit Plans |
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Traditional benefit plan. |
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Provides set monthly payments to employees either for life or for a set term. |
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Benefits mainly older, highly compensated employees. |
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Administrative costs may be high. |
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Flexibility is relatively low once the plan is established. |
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Employee Stock Ownership Plans |
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Inexpensive to administer. |
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Allows you to save tax dollars without a cash outlay. |
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May dilute your stock ownership. |
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Financing can be less expensive. |
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Allows your company to buy out other shareholders on a tax-deductible basis. |
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Easy to set up. |
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Simplified Employee Pension Plans |
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Easy to set up and very inexpensive. |
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Has no required employer contribution. |
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Matching contributions are not allowed. |
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Participants are always fully vested and may withdraw funds at any time. |
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Very simple to operate. |
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