Types of Plans
Hicks Pension Services utilizes over 50 years of experience in the retirement plan industry to design a plan to fit your company’s needs. Please see below for some of the most popular plans we administer.
401(k) Plan
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Safe Harbor 401(k) Plan
Safe harbor contributions can be added to traditional 401(k) plans to eliminate the burden of discrimination testing. They require the employer to make a specific contribution to each participant in the plan, which can be non-elective or matching. The safe harbor feature makes it possible for highly compensated employees to defer up to the annual maximum every year. The most common safe harbor formulas are:
- Basic match: A 100% match on an eligible employee’s deferral up to 3% of annual compensation and a 50% match on the next 2% of the employee’s deferrals.
- Enhanced match: A matching contribution that’s at least as generous as the basic match at any level of an employee’s deferral. For example, eligible employees may receive a 100% match on deferrals up to 4% of their annual compensation.
- 3% Non-Elective: A contribution for all eligible employees – including employees who don’t defer compensation – that equals a minimum of 3% of their annual compensation.
Cash Balance Plan
A cash balance plan is a type of defined benefit plan that has characteristics of a defined contribution plan, such as a 401(k), and offers more portability than traditional pension plans – you can take your vested account as a lump sum whenever you terminate employment. Each year, a participant’s account is credited with a pay credit (compensation based) and an interest credit. This is a powerful retention tool that is not subject to annual contribution limits.
Advantages:
- Option to overfund contributions (150%) in a good year
- Excellent source of retirement income for older business owners close to retiring
- Can contribute well above traditional 401(k) annual limits
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