My husband has an s-corp and is now the sole employee. Is it as simple as getting a form from the IRS to set up a 401k plan for his 'employee?' Is this the best way to get more than 2000 a year put into a tax deferred plan? I have read about IRA's etc. but am not sure about the 401k as it is usually set up for you so there is not a whole lot to find out there on how to set it up as the employer. Know what I mean? I have become the investor in the family and am learning the foolish stuff. It is great. Any answers out there?
You may also want to look at a SIMPLE IRA, allows $6,000/year +3% company match. If that's in the range of what you want to put away, a SIMPLE is truly much more "simple" than a 401K. If you are able to save more than $6,000 + match, then other options including 401K and Defined Benefit plans may be better but are more expensive to maintain.~Larry
........ also want to look at a SIMPLE IRA, allows $6,000/year +3% company match. If that's in the range.....The problem that I ran into with our 401(K) was the yearly maintenance fee, which was substantial for our small plan. We switched to a Simple IRA some years ago, with a total yearly cost of $15.00.Pat
The easiest move is for the corporation to adopt a Profit Sharing Plan (any discount broker has prototype plans for which they charge $25 to $50 per year). The plan is really two plans in one: a money purchase component and a profit sharing component. The money purchase component is mandatory and is usually set at 10%. The profit sharing component is discretionary and is usually set at 15%; totalling 25% of pay to the president/owner. Max for the sum of the two components is $30,000 per year. If you need or want to go past that; the corp can adopt a defined benefit plan; which depending on salary (above $120,000) and age of participant; can create annual contributions in the range of $10,000 to $100,000 more. However, you are likely to see much higher fees for a DB plan as it requires the annual review & certification of an enrolled actuary.TheBadger
SJackman:Also check out.....www.quicken.com/small_business/benefits_and_retirement/HTHunikorn
Just to throw more into the mix - I love my SEP - you can contribute 15% of your wages(up to 160k) - which comes out to a limit of 24,000.All the documentation I see says 15% of wages(up to 160k) or 30k - whichever is less. I don't know how anyone gets above 24k - since that's 15% of 160,000.Anyone else know how this magical math works?btw.. I'd swear I've seen it in IRS documentation too!Helter.
The 24k and 30k maximums are for SEPs and QRPs respectively.Sandy
All the documentation I see says 15% of wages(up to 160k) or 30k - whichever is less. I don't know how anyone gets above 24k - since that's 15% of 160,000.The $30K is your total limit to all retirement accounts (SEP, SIMPLE, SARSEP, QRP, Keogh, 401K, 403B, etc...but not Traditional or Roth IRAs) from all sources. So if you have multiple jobs (and thus multiple plans) you have a maximum ceiling.I have a full time job and I am self-employed. So I and my full-time employer cannot contribute more than $30K in total to my retirement plans (401K and SIMPLE), but unfortunately there is little danger of that happening.jbw
The $30K is your total limit to all retirement accounts (SEP, SIMPLE, SARSEP, QRP, Keogh, 401K, 403B, etc...but not Traditional or Roth IRAs) from all sources. So if you have multiple jobs (and thus multiple plans) you have a maximum ceiling.But as Sandy pointed out yesterday, you can go up to $30K with just one retirement plan: the Qualified Retirement Plan (QRP). That's one advantage of a QRP over a SEP - a $30K ceiling versus $24K (not that it has become an issue for me yet <g>).I have only one "job" as the sole employee of my C-corp., and my corporation can put a maximum of $30K into my QRP.Brian
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