Comprehensive Capabilities

  The foundation of AWP Life Brokerage is the belief that firms are strengthened by the ability to work in tandem as a unified consortium.  Our specializations include insurance concepts and...


Industry Leader

  AWP has proven continual leadership in delivery of benefits solutions for companies of any size as well as we continue to be a leading enterprise in life insurance planning and...


Institutional Relationships

Institutional accounts are integral to our overall distribution plan.  We define institutions as banks, wirehouses, regional broker dealers, and CPA networks. AWP has acquired recognition as a player in the institutional...


Pioneering Captive Insurance

Introduction Despite the fact that the concept of “captive” traces its origins to the beginnings of formalized trade, many people believe captive insurance companies to be a relatively new phenomenon.  Formed...


Premium Financing

Many affluent clients are aware of the benefits that life insurance can provide.  However, clients often harbor concerns that a substantial income tax liability will result from liquidating low basis...


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Retirement

Sponsoring a retirement plan within the complexities of today’s world is challenging for most employers.  Managing routine activities of the plan is cumbersome in and of its own, and, when combined with the added responsibility of staying abreast of intermittent potential regulatory and legislative changes, it is most certainly an intimidating task.


Considering the multitude of your other company responsibilities and commitments, it may seem daunting to even begin keeping up with what you need to know about your company’s retirement plan.  Fortunately, there is an effective way to help you manage your responsibilities and mitigate risk: Engage and expert.

 

Not all advisors are created equal.  AWP retirement plan advisors provide a comprehensive, process-driven delivery of services to ensure all facets of your company’s retirement plan are addressed with efficacy.

 

Our high quality, consultative approach stands independently from any particular product manufacturer or retirement plan provider.  In this way, our advisors have a full spectrum of access to the “best-of-breed” providers in the marketplace, and thus they are able to efficiently provide the most appropriate solution for your plan.

 


Employer-sponsored Retirement Plans—These plans offer value to both employers and their employees.  They provide employers with a distinct advantage in attraction and retention of quality employees, while simultaneously they provide employees with a convenient way to save for retirement.  In some cases, an employer-sponsored retirement plan may in fact be the only financial investment an employee makes in their future.

 

There are today a number of retirement plan types for employers to choose from.  Below are some of the more popular plans that companies tend to offer.

 

401(k) Plans


Easily the most popular retirement plan, the 401(k) is a very flexible plan able to be implemented by companies of all sizes, from sole proprietors and self-employed individuals to large, publicly traded firms.  Employers are responsible for establishing the plan and, once established, employees choose to defer a certain portion of their annual salaries into the plan.  In a participant-directed plan (the most common type), the employee makes his/her own investment decisions.  Alternatively, in a trustee-directed 401(k), the employer-appointed trustees make investment decisions on behalf of their employees.


401(k) plans offer many features that make them attractive, including the ability of the employer to customize the plan to meet their specific needs.  Another advantage is that employers are exempt from mandatory employer contributions.  However, 401(k) plans require more administration and can cost more than some alternative retirement plan options.  Nonetheless, its flexibility makes the 401(k) a popular choice for large and small businesses alike.


Advantages of a 401(k)


Tax Deferral—Employees are eligible to make salary deferrals on a pre-tax basis of us to $16,500 in 2009 ($22,000 for age 50 and older).

Matching Contributions—Employers are given the option to make matching and profit-sharing contributions that, in combination, can reach maximum totals of 25 percent of compensation.  In 2009, the combination of employee deferrals and employer contributions totaled approximately up to the lesser of $49,000 or 100 percent of compensation.

Flexibility—Employers can determine matching formulas and vesting schedules of employer contributions and may implement convenience features such as automatic enrollment for newly eligible employees and automatic deferral increases for all participants.

 

Profit-sharing Plans


Profit-sharing plans allow employers to make discretionary, tax-deductible contributions on behalf of their employees in a manner similar to that of the SEP IRA (discussed later in this section).  Profit-sharing plans also provide employers with greater control over eligibility requirements and vesting schedules.


Advantages of a Profit-sharing Plan


High Contribution Limits—For 2009, employers had the freedom to contribute up to the lesser of 25 percent compensation or $49,000.

Choice—The amount of the contribution can be altered from year to year and is determined at the discretion of the employer (called a “discretionary” contribution).

Integration Permitted—Contributions may either be flat percentages of each employee’s compensation or be integrated with the Social Security taxable wage base ($106,800 for 2009).  Employees earning more than the current base are entitled to receive a greater portion of the contribution to compensate for the smaller percentage of Social Security benefits they accrue.

Flexibility—Employer has option to establish a vesting schedule and decide whether or not to make loans and hardship withdrawals available to participants.

Eligibility—Part-time and seasonal employees may be excluded with defined eligibility requirements.

 

403(b) Plans


A 403(b) plan functions in a manner similar to that of a 401(k) plan – similar characteristics, withdrawals, contribution limits, tax rules, and investment options – with the exception that 403(b) plans are available exclusively to employees of eligible tax-exempt organizations, including:


Public education institutions—elementary and high schools, colleges and universities

Churches or church-related organizations

501(3)(c) tax-exempt organizations, such as:

Nonprofit hospitals

Social and welfare organizations

Museums and others


Previously, 403(b) plans were exempt from many of the documentation, recordkeeping, and reporting requirements that other retirement plans were subject to.  However, new regulations have imposed significant changes on administrations of 403(b) plans, and employers are now obligated to engage in a more active role in overseeing their plans to ensure that they comply with IRS regulations.  Specifically, most 403(b) plans now require maintenance of plan documents and the mandatory filing of an annual Form 5500 just as their 401(k) counterparts require.

 

Defined Benefit Plans


The majority of retirement plans, including 401(k), profit-sharing, and 403(b), are known as defined contribution (DC) plans because the amount “contributed” to the plan is known or “defined”.  The employer, employee, or both contribute to the employee’s individual account at a defined rate, such as 5 percent of pay.  The future benefit of individual accounts is not defined and thus the ultimate account balance will fluctuate depending on performance of underlying investments.


A defined benefit plan does, however, promise a specified monthly benefit upon retirement.  The plan may state this promised benefit as a precise dollar amount such as $100 per month at retirement.  Alternatively and more commonly, it may calculate a benefit through a plan formula that considers factors such as salary and service.  The benefits in most traditional defined benefit plans are protected, within confines, by federal insurance provided by the Pension Benefit Guaranty Corporation (PBGC).


Defined benefit plans are qualified retirement accounts that pay a specific benefit at the plan holder’s retirement age.  Defined benefit plans are potentially excellent options for companies with older employees who wish to accumulate assets with rapidity, or for high-revenue companies and small businesses that can afford to make higher contributions.


Advantages of a Defined Benefit Plan

Accumulation—Lifetime defined benefit accumulation limit of approximately $2 million.

Tax Deductions—Contributions to individual defined benefit plan are a deductible business expense and offer the largest deductions available under current tax laws.

Investment Options—Investment committee given greater flexibility in making investment decisions than in other retirement plan designs.

Asset Protection—Plan assets are protected from creditors under current federal guidelines.

High Benefit Limits—Maximum retirement benefit of 100 percent of average compensation for three consecutive years in which the participant’s compensation was at its relative height, up to a maximum of $195,000 for 2009.

Known Benefit Amount—Employees are privy to amount to be received at retirement, unlike defined contribution plans such as 401(k)s.

Ability to Combine with Defined Contribution Plans—Ability to contribute maximum allowed amounts to a defined contribution plan while still funding a defined benefit plan.

 

Small Business Plans  

 

Many small business owners believe that they are prohibited financially from affording their employees retirement plans.  However, several legislative changes in recent years have simplified and made more affordable the option for small businesses to offer a retirement plan from which employers and employees alike can benefit.

Small business owners should consider the following advantages when deciding whether to offer a retirement plan to their employees:

Retirement Income—A retirement plan can help employers and employees to bridge the gap between Social Security income and total financial needs.

Tax Deductions—Contributions are tax-deductible from business income.

Tax Credits—Employers can claim a tax credit for part of the costs of instating or administering certain retirement plans.

Valuable Employee Benefit—Retirement plans are a sought-after benefit that can assist employers in recruiting, rewarding, and retaining valuable employees.

Below are a few options suitable for start-ups or established small businesses such as self-employed individuals, sole proprietors, independent contractors, 1099 earned income recipients, independent moonlighters, LLCs, partnerships, and incorporations:

SEP IRA

SIMPLE IRA

Individual 401(k)

Single Participant Defined Benefit Plan