Employer-sponsored retirement plans allow you to save for retirement through the convenience of automatic payroll deduction. You contribute a portion of your paycheck to the plan, choosing from a list of investment options and money managers. Your contributions may lower your taxable income and accumulate tax-deferred, until you begin making withdrawals.
The Benefits of Participating in Your Employer's Plan
- Allows you to save for retirement on a pre-tax basis
- Your taxable income is reduced by the amount of your contribution
- Any earnings are tax-deferred until withdrawn
Types of Retirement Plans
457 deferred compensation plans are employer-sponsored retirement savings plans, usually offered by municipalities and governmental entities, which allow employees to defer a portion of their current compensation for payment at a later date, generally retirement. Salary deferrals (or contributions) are voluntary, and are made through the ease of payroll deduction. Under this plan, contributions and earnings accumulate tax-deferred and withdrawals are taxed as ordinary income. This plan offers an important supplement to pension plans and/or Social Security.
403(b) retirement plans are available to employees of certain tax-exempt organizations or public educational institutions (usually schools and hospitals). This voluntary plan allows employees to defer a portion of their current compensation for payment at a later date, generally retirement. Salary deferrals (or contributions) are made through the ease of payroll deduction. Under this plan, contributions and earnings will accumulate tax-deferred. Withdrawals from a 403(b) program are subject to ordinary income tax, and if taken prior to age 59½, a 10% federal income tax penalty may apply.
401(a) retirement plans allow government entities to provide an employer contribution to a 401(a) qualified plan. Federal income taxes are deferred until assets are withdrawn, usually during retirement. A 401(a) plan does not affect a participant’s 457 Deferred Compensation plan or the amounts that can be contributed to it.
SEP, SIMPLE and Solo-401(k) plans are available to sole proprietors and small business owners as a way to shelter current income from federal taxation while saving dollars for retirement. Depending on the employer’s goals and the size of the business, RPA can help identify the plan that’s right.
Retiree Healthcare Funding programs are limited to public sector employers/employees and collective bargaining groups. RPA’s Healthcare Reimbursement Account (HRA) programs, utilizing VEBA and/or 115 Integral Part Trusts, provide participants with tax-free dollars for qualified retiree healthcare expenses. Comprehensive investment menus with broad asset class representation and competitive pricing make these programs an attractive answer to healthcare funding in retirement. Our experienced representatives offer on-site personalized independent investment advice and retirement counseling.
Employer-sponsored retirement plans offer a tax deferral opportunity and an effective way to maximize retirement savings through payroll deduction. If an employer offers a plan, employees should take full advantage and consider contributing as much as possible up to the applicable limit.