New Comparability Plan – Profit Sharing Plan
Beacon Capital Management Advisors provides small business 401k plans to small business owners and to corporations ranging from 1 to 1,000 employees. BCM 401k clients benefit from our retirement plan experience due to our existing relationships with numerous small business 401k providers. Our understanding of the small business 401k plan marketplace enables us to find the 401k plan that is best suited for our small business clients. BCM is registered in 50 States.
If a small business owner has full time W-2 employees (other than the business owner or their spouse) then they do not qualify for an Individual 401k and must establish a traditional 401k plan for their small business. 401k plans may consist of an elective salary deferral contribution so participants can make contributions to the 401k by payroll deduction when W-2 salary is paid and in addition may have a profit sharing plan added to the 401k. 401k plans can have custom features and BCM helps small businesses with their 401k plan design to maximize the benefits to our small business clients while maintaining compliance with the IRS rules. Below are a couple of examples.
New Comparability Plan
A small business owner may want to add a profit sharing plan to their 401k. One type of profit sharing plan is a New Comparability Plan. If a small business owner would like to maximize the profit sharing contribution to the business owners or key employees while minimizing the contributions into the other employees they may be interested in establishing a New Comparability Plan. A New Comparability Plan is a profit sharing plan in which employees are divided into groups with each group receiving an employer contribution that is a different percentage of compensation. A small business can set up a New Comparability Plan to maximize contributions to the business owner and to benefit key employees while still satisfying IRS rules for a 401k profit sharing plan.
Safe Harbor 401k
Small business owners and highly compensated employees are negatively impacted when they want to make significant contributions to the 401k and the non-highly compensated employees do not. A Safe Harbor 401k can be beneficial for small business owners who would like to contribute the 2021 salary deferral limit ($19,500 or $26,000 if age 50+), but anticipate they will fail the non-discrimination tests in a 401(k) plan. The Safe Harbor 401k plan allows owners and highly compensated employees to make the maximum salary deferral contributions to a 401k even if the other employees want to make limited or no contributions to the 401k. With a Safe Harbor 401k, the employer must make contributions to eligible employees according to one of two formulas. An employer is required to match employee contributions (100% of the participants first 3% of salary and 50% of the next 2% of salary) or make a non-elective contribution (make a contribution of 3% of salary for all eligible employees whether they contribute to the 401k or not). Each year the employer must make either the matching contributions or the non-elective contributions. The plan document will specify which contributions will be made and this information must be provided to employees before the beginning of each year.
Small Business 401k Services
One of the important services we provide is to serve as objective 401k plan specialists to educate HR directors, CFO’s and business owners regarding the available 401k plans for small businesses in the market place.