- Tax DeductionsAny meaningful description of a defined benefit pension plan (DBPP) must take in account the complexity of its nature. Certain rules governing DBPPs are unique. A DBPP is the only qualified employees’ retirement plan that necessitates an annual actuarial certification from an enrolled actuary in order to verify the appropriate amount of contribution and substantiate the deductibility of such funded contributions. A DBPP is designed theoretically to compute the amount of equity necessary to pay for a projected annual lifetime benefit beginning at a specified age. The determination of the exact amount of annual income that any particular participant is entitled to receive is a function of the benefit formula stipulated in the Plan document and certain reasonable actuarial assumptions projecting benefits to begin at an anticipated normal retirement age. A DBPP is predicated on a projection of the future and therefore the actual date of retirement often proves to be different from the stipulated date. Nevertheless, the Plan Sponsor can rely upon the actuarial certification as the basis for a valid required contribution and justifiable tax deduction.
- Income TaxSalary reductions under a 401(k) Plan are superior to the other options you have for accumulating your own retirement fund, namely contributing to an Individual Retirement Account (IRA) or a personal savings or other investment account. Under a 401(k) Plan, you may potentially set aside as much as $17,500* per year and reduce your taxable income by the full amount you set aside. With an IRA, you may contribute no more than $6,000 per year if under age 50, some or all of which may not be deductible on your personal Federal Income Tax Return. Any personal investment you make will not be tax deferred as is the case with the 401(k) deferrals you may choose to make.
- Accounting Services
- Retirement PlanningA discretionarily funded Retirement Plan based upon a maximum allowable contribution of the lesser of 25% of annual compensation or $50,000 (2012). As is the case with a tiered Money Purchase Pension Plan, allocations may be based upon the Plan Sponsor providing differential benefits for employees as a function of job classification and age.