Qualified Retirement Plan Options
Maryland Annuity Resource offers qualified retirement plans in Maryland, Washington D.C. and Virginia. It is important to understand the true definition of what a qualified plan actually is. Qualified retirement plans abide by the rules outlined in ERISA (Employee Retirement Income Security Act) as well as all of the various IRA guidelines for each specific plan.
ERISA does not require employers to establish pension plans. It does not require that plans provide a minimum level of benefits. Instead, it regulates the operation of a pension plan once it has been established. Under ERISA, pension plans must provide for vesting of employees’ pension benefits after a specified minimum number of years. ERISA requires that the employers who sponsor plans satisfy certain minimum funding requirements.
The Pension Benefit Guaranty Corporation was established by ERISA to provide coverage in the event that a terminated defined benefit pension plan does not have sufficient assets to provide the benefits earned by participants. There are two main types of pension plans: defined benefit plans and defined contribution plans. Defined benefit plans provide retirees with a certain level of benefits based on years of service, salary and other factors. Defined contribution plans provide retirees with benefits based on the amount and investment performance of contributions made by the employee and/or employer over a number of years.
Qualified plans such as IRA’s, SEP IRA’s, 401(k)’s, and the ROTH IRA are some options to consider and there are many differences for each. First of all not all plans have the type of investment options your could want. Most plans do not allow the individual purchase option for stocks. Rather they would only have mutual fund choices. Some have contribution limits depending on the plan so it is important to understand all of the differences.
Distributions from qualified plans are taxed as ordinary income when taken as well as taxed a 10% penalty if withdrawn prior to 59 and a half. Qualified plans offer several tax benefits: they allow employers to deduct annual allowable contributions for each participant; contributions and earnings on those contributions are tax-deferred until withdrawn for each participant; and some of the taxes can be deferred even further through a transfer into a different type of IRA.
When shopping for Annuities you will see those two words next to the product offerings. Qualified and Non Qualified. That basically tells you if the plan is within the guidelines stated by ERISA and the IRS. Some carriers have starting deposit guidelines for Q and NQ. The plans are the same in every facet but they use Annuities as the underlying investment instead of mutual funds.
For more information about Qualified Retirement Plan options, click here.