As many employers struggle to hire and hold on to high-quality employees, one way they are approaching this is through their benefit plans. One of the more important decisions employers make is what kind of retirement plan to put into place that will reward and retain all levels of their employees, including top management and business owners. For most employers, it has become more a question of which plan is right for their company as opposed to whether or not they should offer one.

A plan is considered qualified when it meets regulations set forth in the Employee Retirement Income Security Act of 1974 (ERISA). By meeting these guidelines, the employer and participating employees receive favorable tax treatment on funds invested in the plan. Additionally, some small employers starting a new plan may be eligible for a tax credit on administration cost.

There are many plan design options available to employers today. However, when looking at retirement plans, there are two basic categories – Defined Benefit plans and Defined Contribution plans.

Defined Benefit plans are much as the name implies. A benefit is defined and received at retirement. The employer has the ability to select (within IRS guidelines) the level of benefits to be provided at retirement, such as a fixed monthly payment or a certain percentage of compensation. Contributions are made annually based on certain actuarial assumptions and the benefit formula as stated in the plan document, and in most cases are mandatory.

Defined Contribution plans are set up on a discretionary basis and can offer more flexibility concerning contributions than a Defined Benefit plan. The employer has the option of deciding what level of contributions will be made into the plan each year in most plan designs. The contributions are then distributed to the participants according to the allocation formula outlined in the plan document.

Though it may seem a daunting task to wade through the vast amount of information and regulations surrounding retirement plans, employers who take the time to find the right type of plan for their corporation discover it to be a valuable tool. The right retirement plan can help to retain key employees, reward high performers and upper level management, and boost company profits while also providing a key benefit to a corporation's biggest asset, its employees.

For a no obligation review of your current plan and suggestions for better planning (if applicable) please submit the "Employee Census" form. There is no cost for this service. You will receive a complete illustration for your Firm within one week or less.