Qualified Plans:

Qualified Plans provide you the opportunity to offer a retirement program for you and your employees. These plans are governed by the Internal Revenue Service. They enhance your competitive position in the marketplace, provide tax deductions of the contributions and administrative expenses, motivate employees to take more interest in the company's success and provide for an improved lifestyle at retirement.

Profit Sharing:

Profit Sharing Plans are the most flexible plan with respect to the amount of contribution made each year. Contributions are generally discretionary but the company must agree to make "substantial and recurring" deposits. In years when the company does make profits, it could elect to forgo or limit the amount of contribution to be made for a particular year.

These plans involve the sharing of company profits with the employees each year. The plan must define the formula for allocating these contributions to employees. Allocations can be based upon an age-based method, a tiered or cross-tested method, a method which accounts for the permitted disparity of social security benefits (a.k.a. integration) and the most popular method, pro-rata based upon a participant's compensation as compared to the total compensation of all plan participants.

The maximum contribution that may be made by the company each year is 15% of eligible compensation. In some cases individual participant's may receive an amount greater than 15% due to the allocation formula, but in no event, can the funding/deductibility of the employer contribution exceed 15% on a company level.

In certain situations safe harbor plans provide an excellent opportunity for retirement savings for the highly compensated employee while assuring the non-highly are benefitting.

There are various methods in which these contributions are allocated to eligible participants:

• Compensation to total compensation ("pro-rata")
• Permitted disparity
• Combination of age and compensation
• Tiered approach with "cross testing"
• Units such as years of service

401(k):

Currently, 401(k) plans are the most popular plan with employees and employers. These plans allow for pre-tax employee contributions, with or without matching employer contributions. Employees contributions ("deferrals") are limited by law to an annual amount limit. In 1997, the maximum is $9,500.00. This amount may be increased by the government each year. The sum of all employee and employer contributions for a given participant in any year cannot exceed the lesser of $30,000 or 25% of the participant's compensation.

Money Purchase Pension Plan:

Company contributions are mandatory and usually based solely on each participant's compensation. The obligation to fund the plan makes the plan different from a profit sharing plan. If the company fails to make a contribution, a penalty tax to the company could be imposed.

Retirement benefits are based upon how much is in the participant's account at the time of retirement - whatever pension the money can purchase. The maximum formula allowed under this plan is 25% of compensation.

Employee Stock Ownership Plan ("ESOP"):

ESOPs allow employees to become stockholders in the company through employer contributions of the company stocks and are also governed by many complex rules.

Stock bonus and employee stock ownership plans provide benefits similar to those of profit sharing plans, except that the contributions by the employer are not necessarily dependent on profits. Contributions to these plans must primarily be made in shares of company stock.

A stock plan can be used as a market for company stock, as a method of increasing the cash flow of the company, a means of financing the company's growth or an estate planning vehicle for the owner of a closely held corporation.

Target Benefit Pension Plan:

A target benefit is a hybrid or cross between a defined benefit plan and a money purchase pension plan. A target plan operates in some ways like a money purchase pension plan and in other ways like a defined benefit pension plan. Contribution allocations are based upon an amount needed to accumulate a fund sufficient to pay a projected retirement benefit (the target benefit) to each participant at retirement age, but in no event can a participant receive more than a money purchase plan allows. That is why it is a "target" and not a "defined" benefit.

Defined Benefit Pension Plan:

This plan type pre-defines the monthly benefit amount an employee will receive beginning at Normal Retirement Age. The employer is required in most cases to provide the minimum funding requirements, regardless of profitability. The annual contribution is calculated utilizing actuarial methods. These plans may require additional government reporting.

Simplified Employee Pension (SEPs):

SEPs are intended to encourage small employers to setup retirement plans for their employees by removing much of the expenses and paperwork associated with pension plans. An employer may contribute up to $30,000 a year or 15 percent of compensation, whichever is less, to individual retirement accounts (IRAs) for each employee. In combination with a Salary Reduction Agreement, the employees may elect to defer up to $9,500 of their salary to the SEP if at least 50 percent of the employees participate.

SEPs have slightly different rules related to eligibility, vesting, testing, contribution limits and withdrawals.

Non-Qualified Plans:

A non-qualified plan is designed to enhance the current benefit program for a select group or individual employee. These plans are tailored to the needs of the interested parties. The employee's are generally provided a deferred benefit taxable at the time it is received. The company does not receive a deduction until the time it is received by the employee.

Section 125/Cafeteria Plans:

Internal Revenue Code Section 125 allows for employees to defer pre-tax dollars (compensation) towards the payment of certain expenses. Employees are offered a "menu" of options to choose from. The most popular options include dependent care expenses (daycare), medical and dental premiums, group life insurance premiums, and certain medical expenses. The amounts deferred are exempt from taxes such as FICA, Federal and certain State's.

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