$6,000 per year. The employer can a

$6,000 per year. The employer can also make a non elective contribution of 2 percent of each employee’s earnings whether or not the employee contributes to the plan.

Employers have the flexibility of contributing at least 1 percent of an employee’s pay in two years of a five-year period and 3 percent in the other three years. An employer has minimal set-up cost, no administrative fees, and there is no discrimination test.

Employees can make withdrawals from the plan at any time but there is a 25 percent withdrawal penalty before age 59 or within two years after becoming a plan participant. Employees may take loans against the plan and take withdrawal under certain hardship situations. The employee fund is 100 percent vested upon making the contribution.

A SIMPLE can be either a SIMPLE IRA or a SIMPLE 401(k). Although both kinds of plans are similar, differences relate to (1) administrative requirements, (2) employer contributions, and (3) access to assets.

Keogh (HR-10) Plan
Self-employed persons such as partners or solo proprietors can provide for their retirement by establishing a Keogh (HR-10) plan.

A Keogh plan can take three options: (1) profit-sharing plan, (2) money-purchase plan, or (3) paired plan. In a profit-sharing plan, the employer can (1) contribute from 0 percent to 15 percent of W-2 earnings up to a maximum of $160,000 each year, or (2) vary contributions from year to year and skip years.

In a money-purchase plan, the employer can (1) contribute 0 to 25 percent of W-2 earning of up to a maximum of $160,000 each year, or (2) make contributions each year based on a fixed annual contribution percentage specified when setting up the plan.

A paired plan allows the employer to (1) contribute from 0 to 25 percent of W-2 earnings of up to a maximum of $160,000 each year or (2) contribute a fixed annual contribution percentage to a money-purchase plan and vary contributions to the participant’s profit-sharing plan.

For any of these Keogh plans, the contribution to each eligible employee must be the same percentage of W-2 earnings as that contributed for the owner.

Roth and Education IRAs
With the passage of TRA 97, Roth IRAs and Education IRAs were offered to the U.S. taxpayer. Both IRAs permit certain individuals to contribute to the IRA and receive certain benefits.

Roth IRAs permit individuals who meet certain income requirements to contribute up to$2,000 ($4,000 if married and filing jointly). Roth IRAs do not allow any tax deductions for annual contributions. However, all earnings are income tax free upon withdrawal. There is no age 70 forced distribution, and an investor can contribute to a Roth IRA as long as desired. Individuals who contribute to a SIMPLE or SEP IRA may also contribute up to $2,000 for a ROTH IRA.

Education IRAs allow one or more individuals to contribute up to a maximum of $500 per year per child for the child’s education. There is no up-front tax deduction, but all money earned through the investment is exempt from federal income tax as long as the money is withdrawn to pay for college expenses.

Most people and most organizations look to a future that provides better opportunities or, at a minimum, opportunities provided by employers receive little recognition by many employees (long-term means compensation options that become available beyond the current operating year).

After spending 10 or so years in the workforce, many employees want to believe there is “life after work,” not just daily after working hours, weekends, holidays, and vacations, but a comfortable retirement. For most workers, Social Security payments alone will not replace the income acquired from on-the-job earnings. Most large and medium-size organizations provide pension plans to supplement Social Security. In addition, select groups of employees (these groups are increasing in size every year) are being offered a variety of long-term compensation programs that can significantly enhance their Social Security and qualified pension plan earnings. Many employees have not considered long-term compensation arrangements to be an incentive. As more employees become affected by corporate streamlining, takeovers, and bankruptcies, they recognize that continuing viability, let alone the generosity of the pension plan, depends on the performance and success of their organizations. This recognition of the relationship between organizational survival and long-term security is promoting a willingness to perform in a manner that helps ensure organizational success. It is making long-term compensation a psychological imperative.