RETIREMENT PLANS FOR BUSINESSES

Everyone needs to prepare for a comfortable retirement, but planning can be more complex for business owners. You not only have to prepare for yourself, but your employees, and in this you want the retirement plan you choose to balance cost-effectiveness with the ability to attract and retain top talent.

Here is an overview of the most common retirement saving arrangements for small and mid-size businesses:

SEP IRA

Appropriate for employers with a smaller number of employees, a SEP plan gives the employer the option to elect each year how much to contribute on behalf of eligible employees. You as employer may contribute from 0% to 25% of compensation, subject to an annual cap, with all contributions tax-deductible as a business expense. SEP contributions go directly into a Traditional IRA in the name of the employee, relieving the employer of having to oversee the assets after they are contributed.

Benefits:

• Tax-deferred earnings for the employee
• Contributions are deductible as a business expense
• Setup is easy—the employer completes a one-page IRS form, and employees complete the IRA application
• Wide range of investment products—including stocks, bonds, and mutual funds

401(k)

Historically the retirement plan of choice for large corporations, 401(k)’s are now attractive to businesses of all sizes, thanks to recent rule changes that have lowered the administrative cost.

Benefits:

• May offer a range of investment choices for employees
• Shares the responsibility of retirement savings between the employer and employee
• Payroll deduction provides an easy, disciplined way for employees to save
• Employer matching contributions can be contingent on employee contribution

Individual 401(k)

In an owner-only business¹, planning and preparing for retirement can be a dilemma. Until very recently, retirement plans were limited, and the available choices had significant drawbacks. Plans like Evergreen² OnePlan^SM offer owner-only businesses all the advantages of a bigger company’s 401(k) plan – at a price and level of convenience that may be ideal for many small businesses.

Benefits:

• Online plan establishment
• IRS-approved prototype plan document
• Simplified recordkeeping and administration
• Load-waived access to multiple fund families
• Potentially higher contribution limits
• Access to loans

SIMPLE

SIMPLE plans, also known as Saving Incentive Match Plans for Employees, combine the simplicity of SEP-IRAs with the employee funding of a 401(k), where employer contributions largely match employee contributions.

Employers are required to either:

• Match any elective contributions made by an employee dollar for dollar up to a limit of 3% of the employee’s compensation, OR
• Make a non-elective contribution of 2% of each eligible employee’s compensation.

Profit Sharing/Money Purchase Pension Plans

For self-employed or small businesses, Profit Sharing and Money Purchase Pension Plans allow an employer contribution for oneself, with special vesting and eligibility requirements to restrict the involvement of part-time or short-term employees.

Benefits:

• Plans may permit an employer to make higher contributions for their employees
• Annual contributions can go as high as 100% of an employee's compensation or $46,000 in 2008, whichever is less (business owners can deduct only 25% of total eligible compensation as a business expense)
• For a Profit Sharing Plan, flexible plan design gives you some discretion in the amount contributed annually
• For Money Purchase Pension Plans, the company commits to a set annual contribution percentage

Don’t overlook your personal investments

Even with these or other retirement plans for your business, an IRA allows you to contribute up to $4,000 for 2007 and $5,000 for 2008. If you are age 50 or older, you are also eligible to make an additional “catch up” contribution of $1,000 to your IRA for each year.

You may be eligible to make contributions to a Roth IRA if your income does not exceed certain limits. With a Roth IRA, qualified withdrawals are tax-free.

Talk to your Financial Advisor about savings accounts for short-term funds, finding ways to set aside money in a brokerage or mutual fund account for long-term purposes, and for finding ways to keep your business from being the only asset you will have in retirement.

Wachovia Securities is the trade name used by two separate, registered broker-dealers and non-bank affiliates of Wachovia Corporation providing certain retail securities brokerage services: Wachovia Securities, LLC, Member NYSE/SIPC, and Wachovia Securities Financial Network, LLC, Member FINRA /SIPC.

The information provided in this Web site is not intended to be nor should it be construed as tax or legal advice. As with any tax planning matter or strategy, please consult with your attorney and/or tax advisor.

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•SEP Plan
•Small Business Retirement Plan
•Emerging Business Retirement Plan
•Owner Only Business Retirement Plan

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