TYPES OF QUALIFIED PLANS

SUITABLE FOR: CORPORATIONS, SUB-CHAPTER “S” CORPORATIONS, PARTNERSHIPS, SOLE PROPRIETORSHIPS, LIMITED LIABILITY CORPORATIONS, NON-PROFITS

Contributions are completely flexible and determined by the employer each year. This type of plan is generally used by new businesses or those with fluctuating profits.

Age-Weighted The typical profit sharing plan allocates contributions evenly among all participants, based on a percentage of wages. An age-weighted plan uses an allocation schedule that skews contributions towards those participants who are older and / or higher paid.

Social Security Integration This allocation formula skews contributions towards those participants who are earning more than the current F.I.C.A. wage base.

Tiered, Class or New Comparability This allocation formula allows employers to create “Tier” or “Class” of participants.Contribution amounts can then be varied by each Class, giving the employer substantial flexibility in determining how monies are allocated..

401-(k) A 401-(k) provision may be added to a profit sharing plan to allow participants to make pre-tax contributions through salary reduction arrangements. An individual may contribute up to 100% of wages limited to $ 15,500 in 2008. The employer may offer a matching contribution on a year by year basis.

Money Purchase Maximum Annual Contribution: 1 - 25% of Eligible Wages

Contributions are based on a fixed percentage of wages and are mandatory. This type of Plan is typically used by entities desiring a fixed employer commitment such as Associations and non-profits.

Defined Benefit Maximum Annual Contribution : Actuarially Determined

This is a true pension plan. A pre-specified amount of income is guaranteed every participant upon retirement. Contributions are greatly skewed towards the older and highest paid participants. Maximum Annual Pension Benefit is $185,000.

This type of plan is generally used by businesses with older principals or owners desiring contributions substantially higher than a Profit Sharing or Money Purchase plan. Such businesses must be able to make substantial contributions on a regular basis.

412(i) Pension This is a form of Defined Benefit Plan which invests 100% of it’s assets in insurance and/or annuity contracts, thereby shifting the actuarial burden from the employer to the insurance company. Contributions are typically significantly higher than a normal Defined Benefit Plan.

Davis Bacon

Davis-Bacon Act of 1931 requires employers performing work on federally funded projects to pay "prevailing wages" to employees. The Act was intended to put federal contractors on equal footing with respect to labor costs.

The "prevailing wage" includes both a salary component and the anticipated costs of "prevailing benefits" such as health insurance, retirement, and other fringe benefits. It is often expressed as an hourly rate such as $25.00 per hour and $8.00 per hour for the cost of providing benefits. Employers can elect to pay the cost of benefits (the $8 portion) as salary or they can provide true benefits. The prevailing rates are often based on union scale and are published and updated by the U.S. Department of Labor.

A non-union contractor working on public projects is required to provide 100% of the local Prevailing Wage on public projects, but they may choose to pay only the Base Rate in cash.

By depositing the Fringe Benefit Rate in the Davis-Bacon Pension Plan & Trust, the employer saves the payroll taxes, workers compensation and insurance premiums on those funds.

Davis Bacon / Prevailing Wage Plans