Page 186 - Group Insurance and Retirement Benefit IC 83 E- Book

Failure to meet IRS requirements can lead to plan disqualification, which carries with it

enormous tax consequences.

SIMPLE IRAs

A SIMPLE IRA is a type of Individual Retirement Account (IRA) that is provided by an

employer. It is similar to a 401(k) but offers simpler and less costly administration rules.
Like a 401(k) plan, the SIMPLE IRA is funded by a pre-tax salary reduction. However,

contribution limits for SIMPLE plans are lower than for most other types of employer-
provided retirement plans.

SEP IRAs

A Simplified Employee Pension Individual Retirement Account, or SEP IRA, is a

variation of the Individual Retirement Account. SEP IRAs are adopted by business
owners to provide retirement benefits for the business owners and their employees. There

are no significant administration costs for self-employed person with no employees. If the
self-employed person does have employees, all employees must receive the same benefits

under a SEP plan. Since SEP accounts are treated as IRAs, funds can be invested the
same way as any other IRA.

Keogh or HR10 Plans

Keogh plans are full-fledged pension plans for the self-employed. Named for U.S.

Representative Eugene James Keogh of New York, they are sometimes called HR10
plans.

Nonqualified plans

Plans that do not meet the guidelines required to receive favorable tax treatment are
considered nonqualified and are exempt from the restrictions placed on qualified plans.

They are typically used to provide additional benefits to key or highly paid employees,
such as executives and officers. Examples include SERP (Supplemental Executive

Retirement Plans) and 457(f) plans.

Contrasting types of retirement plans