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Archive for the ‘Tax Strategies’ Category

Deferred Contribution Plans

Oct 4, 2011 Retirement plans, Tax Strategies

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Defined Contribution Plans

Defined contribution plans focus on the accumulation rather than eventual distribution of retirement funds. An employee chooses to divert a portion of their wages (called elective deferral) up to some specific annual limit to a specially designated savings plan.  An employee, rather than an employer, assumes all investment risks. The diverted funds affect Social Security and Medicare taxes but are not included as taxable income in the year they are received. An employee pays income tax when the funds are distributed during their retirement years. There is a wide range of defined contribution plans based on an employee’s elective deferral of wages.

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Retirement savings plans

Oct 3, 2011 Retirement plans, Tax Strategies

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Long-term retirement savings plans, like IRA-based and 401(k) employer sponsored programs, are either qualified or non-qualified for tax-favored treatment by the Internal Revenue Service. Qualified plans have rules regarding non-discrimination among employees and minimum coverage and participation requirements. A non-qualified retirement plan might, for example, favor one particular group of employees such as a few highly compensated employees over others. Such plans are not subject to the same rules and regulations as the more common qualified plans.

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