Employer Sponsored Retirement Accounts
401k: Employer sponsored retirement plan. For the year 2005, employee contributions can be as much as $ 14,000 or 100% of compensation. Those 50 years or older can make catch-up contributions up to $ 4,000. Your employer may or may not match contributions to this account. The total amount of contributions (employee and employer) can not exceed $ 42,000 for the year 2005. Earnings in a 401k grow tax-deferred until distribution. 401k’s can be rolled over to IRA Rollover accounts to protect the tax-deferred status of your account when you leave your employer.
403b: Similar to the 401k, except that it is provided to employees of certain tax-exempt and non-profit organizations. This includes teachers, nurses, and employees of most non-profit organizations. The contribution limits are the same as the 401k. Most 403b’s can also be rolled over to IRA rollover accounts to protect the tax-deferred status of your account.
SIMPLE IRA: You can set up a SIMPLE IRA plan if you meet both the following requirements.
- You meet the employee limit.
- You do not maintain another qualified plan unless the other plan is for collective bargaining employees.
Employee Contribution: Employee - $10,000 in 2005. If the employee is aged 50 and over, an additional “catch-up” contribution is allowed. The additional contribution amount in 2005 is $2,000.
Employer Contribution: Either dollar-for-dollar matching contributions, up to 3% of employee's compensation, or fixed non -elective contributions of 2% of compensation. Compensation eligible for matching contributions is generally limited to $210,000.
Maximum Deduction:
Employee: Same as maximum contribution
Employer: Same as maximum contribution
Distribution rules for Simple IRA’s generally follow the same rules that apply to traditional IRA’s.
Please contact you tax professional for complete details.
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