Qualified Plans

There are two basic types of employer provided Qualified Plans which can be self directed:

1. Defined Benefit Plans
2. Defined Contribution Plans

Defined Benefit Plan: Any plan that is not a Defined Contribution Plan. Contributions to a Defined Benefit Plan are based on a computation of what is needed to provide determinable benefits to each plan participant. An actuary is required to analyze and define these contributions annually. Each participant is provided with an individual account and each participant is required to contribute regularly.

Defined Contribution Plan: An employer based plan which may or may not include employer contributions. The exception is a money contribution plan which requires contributions based on set percentages established in the plan. The benefits in the plan are largely based on the amount that is contributed and/or has been deferred. Benefits are affected by income, expenses, gains, losses and forfeitures of other accounts that may be allocated to the plan. Each participant retains an individual account and may contribute or defer funds voluntarily. This plan includes: Money Purchase Pension Plans, Profit Sharing Plans, Roth 401(k), 401 (k) Plans, and Individual (k) plans. There are specific Defined Contribution Plan Requirements:

1. The plan must be in writing
2. The plan must be communicated to all eligible employees
3. All of the plan’s provisions must be stated

You may have more than one type of plan, but the contributions made must not exceed the overall statutory limitations.