Employer Profile: a paternalistic company with lower-paid employees

Benefit: Contributions can be made at the end of the year after determining profitability. The contribution amount is totally discretionary, including $0. No discrimination test, as in a 401(k) Plan, but all eligible employees must receive a contribution if the owner or highly-compensated employees receive a contribution.

Limits: Deduction limit is 25% of eligible compensation, individual limit is $50,000 in 2012.

Employer Profile : the ages of the highly-compensated group are greater than the ages of the non-highly-compensated group.

Benefit: Higher percentages or contribution amounts can be given to the highly-compensated employees proportionately than to the non-HCE. Requires a special discrimination test in the years when this feature is used.

Limits: A minimum contribution of 5% of compensation will normally be required for non-highly compensated employees. Overall deduction limit is 25% of all eligible employees' compensation. No one individual can receive more than $49,000.

Employer Profile: The ages of the HCE group are 10 years or more greater than the non-HCE group.

Benefit : A higher percentage of contribution amounts can be given to the HCE employees. No special discrimination test is need in the years when a Profit Sharing contribution is made.

Limits: Deduction limit is 25% of eligible compensation, individual limit is $50,000 in 2012.

Employer Profile: Small or large, low profitability or high, consistent profits or not, this is the most popular and best recognized of retirement plans.

Benefit: The employer maintains a competitive retirement plan benefit at a low cost, often with the added option of adding a matching contribution and/or Profit Sharing contributions, which can be allocated in any of the methods described above. As a Defined Contribution or Individual Account Plan, the responsibility is on the employee to accumulate a retirement benefit, not on the Employer.

Limits: personal calendar year limit (2012) of $17,000 for employees age 49 or younger; $22,500 for employees age 50 or older.

Employer Profile: In most respects same as a 401(k) or 403(b) plan.

Benefit: Same as other 401(k)/403(b) Plans except a different type of contribution is allowed for employees. If a plan is amended/created to include the Roth(k) money type, an employee can decide between pre-tax 401(k) contributions or after-tax Roth contributions (or both). In most cases, when a participant takes a distribution of his/her ROTH balance, it is not taxed.

Limits: Same as 401(k)/403(b) Plans

Employer Profile: Fluctuating, sometimes high profitability, with an owner who wants the flexibility to make Profit Sharing contributions, but even in years when a Profit Sharing contribution is not possible, wants the employees to have the opportunity to save for themselves. Most 401(k) plans include a Profit Sharing contribution and a matching contribution, mostly discretionary.

Benefit: The ability to make Profit Sharing contributions in years of high profitability, which may be designed to use the various options listed above: New Comparability, Age-weighted, or proportional.

Limits: Overall deductibility of 25% of eligible compensation for Profit Sharing and Match; 401(k) limit of $17,000 or $22,500, and dollar limit for any one person not to exceed $50,000 or $55,500 in 2012.

Employer Profile: If the 401(k) discrimination testing is likely to fail, or the Plan will be top-heavy (the keys or owners have more than 60% of the assets in the Plan), a Safe Harbor provision takes away the requirement for special 401(k) and top-heavy testing, and special top-heavy contributions.

Benefit: By eliminating the testing requirements, the highly compensated benefit more by always being able to make the maximum 401(k) contributions without the onerous requirements imposed by a failed discrimination test or the necessity of making unexpected minimum contributions to a top-heavy Plan. The one disadvantage is that the Safe Harbor contribution is an obligation, a required contribution. The Safe Harbor can be made either as a Match (usually dollar for dollar of 401(k) contributions up to 4% of compensation) or as a Profit Sharing-type contribution (3% of pay for all eligible participants).

Limits: Same as 401(k) Profit Sharing Contribution.

Employer Profile: Consistent high profits, higher ages for the owners or highly-compensated, and consistently higher earnings (wages) for the owners or highly-compensated. This Plan is best for attorneys, doctors, and other professional service entities with more than 5 but fewer than 25 employees, however other firms, such as engineers or programmers that fit the profile otherwise should consider it. Costs are higher for these groups because of PBGC (Pension Benefit Guaranty Corp.) premiums that are waived for professional service companies. However, the higher contributions may offset this disadvantage.

Benefit: Much higher contributions available to older HCE/owners than in a Defined Contribution Plan, this is a true Defined Benefit Plan, but with participant statements that look like and can be read as individual account statements.

Limits: Total contribution for any one individual will vary with age, with the highest amount to an older employee at approximately $165,000.

Employer Profile: Smaller high-profit companies with older owners or Highly-compensated Employees.

Benefit: Smaller companies can pair a Cash Balance Plan in order to reduce the cost of the Top-Heavy benefit. For these smaller companies it may be easier to administer and less expensive to combine a Cash Balance Plan with a 401(k) Plan.

Employer Profile: Wealthy individuals or high profit companies with older owners or highly-compensated employees who need to accelerate retirement savings, or who want guaranteed income payments at retirement for themselves and their employees.

Benefit: Much higher tax-deductible contributions to the plan than are possible in a Defined Contribution Plan. A Defined Benefit plan can be used in combination with a 401(k) Profit Sharing Plan to increase the deductible contributions even further. Some variable assumptions can be used from year to year which provide a minimum and maximum range of deductible contributions, so the plan sponsor has some flexibility, depending on current circumstances, regarding the required contribution.

Limit: The tax deductible contribution for an older employee who has a short time to retirement may be as high as $250,000 or more. However, younger employees may receive contributions that are even lower than in a Defined Contribution plan, so those employees closer to retirement receive a significantly higher benefit than do younger employees.

Employer Profile: A wealth individual or small company that wants the highest possible tax deductible contributions.

Benefit: Accelerates tax-deductible retirement savings for older high-earning employees nearing retirement.

Limit: Adds the 401(k) limits and a 6% of pay Profit Sharing contribution to the already high Defined Benefit limit.

Employer Profile: For 403(b) Plans subject to ERISA, only 501(c)(3) Nonprofit Charities are eligible. 403(b) Plans not subject to ERISA can be sponsored by Churches, Public Schools, *Government-run Hospitals, * Government-run Museums , and some other Government-funded entities. *However, Government entities in general cannot sponsor 403(b) Plans. Cities, for example, cannot sponsor a 403(b) Plan. *Government entities can sponsor a 457(b) Plan, which is similar. Some nonprofit organizations can maintain a non-ERISA 403(b) if the Plan meets certain requirements: no employer contributions, no restrictions as to the number of vendors (i.e., annuity providers and mutual fund families are not unduly restricted), and the employer delegates to the vendors responsibility for plan transactions such as loans, hardship withdrawals, and severance or retirement benefits.

Benefit: An ERISA 403(b) Plan can be designed with an employer match or employer discretionary contribution, or with a fixed employer contribution, similar to a 401(k) Profit Sharing Plan. No waiting period or eligibility requirements are allowed for the 403(b) portion of the Plan. 403(b) contributions have the same limits as 401(k) plans, although additional catchup contributions may be allowed in certain plans.

Limits: For 403(b) contributions, $17,000 or $22,500 for those age 50 or older are the personal calendar year limits (2012). For matching and other employer contributions, the 415 limits are 100% of compensation in total for all sources of contributions, or if less the dollar limit of $50,000 or $55,500 in 2012 for participants age 50 or older.