Retirement Plan Options

Plan Primer
A little “Retirement Plan 101,” highlighting the basics of the various plans available to you and your employees.

401(k)

• Employers are entitled to a tax deduction for their contributions to employees’ accounts.
• A 401(k) plan benefits a mix of rank-and-file employees and owner/managers.
• The money contributed may grow through investments in stocks, mutual funds, money market funds, savings accounts and other investment vehicles.
• Contributions and earnings generally are not taxed by the federal government or by most state governments until they are distributed.
• A 401(k) plan may allow participants to take their benefits with them when they leave the company, easing administrative burden.

Safe Harbor

• A specific type of 401(k) plan that encourages employee participation and provides employers more leniency in setting up plans, without concerns about discrimination in favor of highly compensated employees.
• In a Safe Harbor 401(k) plan, all contributions must be fully vested immediately.

Profit Sharing

• A plan that gives employees a share in the company’s profits. Each employee receives a percentage of those profits based on the company's earnings.
• The company decides what portion of the profits will be shared.
• A great way to give employees a sense of ownership in the company.

New Comparability

• A profit-sharing plan with an allocation formula that divides employees into two groups: preferred and nonpreferred.
• Contributions are allocated within each group according to relative age and compensation.
• Employers are permitted to add a 401(k) salary-deferral feature.
• Vesting schedule is determined by the employer.
• Withdrawals are governed by the plan document and may be restricted.
• Employers may offer participant loans.

Cash Balance

• In a typical cash balance plan, a participant's account is credited each year with a pay credit (such as 5 percent of compensation from his or her employer) and an interest credit (either a fixed rate or a variable rate that is linked to an index such as the one-year Treasury bill rate).
• Increases and decreases in the value of the plan's investments do not directly affect the benefit amounts promised to participants.
• Investment risks and rewards on plan assets are borne solely by the employer.

Defined Benefit:

• Benefits are determined by a formula that indicates the amount an employee will receive upon retirement. The benefit amount is typically based on a number of factors, including the employee's average salary before retirement, age at retirement and length of employment.
• Benefit amounts can be a specific dollar amount or a compensation percentage.
• Employees do not contribute.

Single-Participant 401(k)

• Single-Participant 401(k) plans – or “Single(k)” – offer 100-percent tax deferral of contributions, the ability to borrow from the plan and fewer administrative headaches than their corporate cousin.

International

• FMi’s international retirement plan solution – often called “Ex-Pat” or “Third Country National” (TCN) plans – are designed for non-U.S. employees working outside their home country.
• These plans give an employer the ability to provide retirement plan benefits during an employee’s secondment (when an employee temporarily changes job roles within the same company, or temporarily transfers to another organization for an agreed-upon period of time).
• Designed to give maximum flexibility and portability to go with the employee when they move within an organization or onto the next phase of life.
• Ideal for mobile employees working in multiple countries who may not qualify for a local plan. This plan can also act as a supplemental plan to local plans around the world.

Bermuda National Pension Scheme

• Every employer must establish and maintain a pension plan in relation to his or her employees, subject to the provisions of the Act and the Regulations.
• Employers are obligated to provide a pension plan for employees, in accordance with the requirements of the Act and Regulations, if the employees are a Bermudian or the husband or wife of a Bermudian; at least 23 years old or more; AND have completed 720 or more hours of employment in a calendar year
• At least once in every month, employers are required to withhold 5-percent contributions from the member’s earnings, and to pay that amount – within 30 days following the month in which it was withheld – together with the employee’s contribution directly to the administrator for payment into the pension fund.