WHAT IS A QUALIFIED RETIREMENT PLAN?
A qualified retirement plan is a program implemented and maintained by an employer or individual for the primary purpose of providing retirement benefits and which meets specific rules spelled out in the Internal Revenue Code. For an employer-sponsored qualified retirement plan, these rules include:
The plan must be established by the employer for the exclusive benefit of the employees and their beneficiaries, the plan must be in writing and it must be communicated to all company employees.
Plan assets cannot be used for purposes other than the exclusive benefit of the employees or their beneficiaries until the plan is terminated and all obligations to employees and their beneficiaries have been satisfied.
Plan contributions or benefits cannot exceed specified amounts.
The plan benefits and/or contributions cannot discriminate in favor of highly-compensated employees.
The plan must meet certain eligibility, coverage, vesting and/or minimum funding standards.
The plan must provide for distributions that meet specified distribution requirements.
The plan must prohibit the assignment or alienation of plan benefits.
Death benefits may be included in the plan, but only to the extent that they are “incidental,” as defined by law.
Question Why do employers comply with these requirements and establish qualified retirement plans?
Answer To benefit from the tax advantages offered by qualified retirement plans.
Qualified Retirement Plan Tax Advantages:
In order to encourage saving for retirement, qualified retirement plans offer a variety of tax advantages to businesses and their employees. The most significant tax breaks offered by all qualified retirement plans are:
Contributions by an employer to a qualified retirement plan are immediately tax deductible as a business expense, up to specified maximum amounts.
Employer contributions are not taxed to the employee until actually distributed.
Investment earnings and gains on qualified retirement plan contributions grow on a tax-deferred basis, meaning that they are not taxed until distributed from the plan.
Depending on the type of qualified retirement plan used, other tax incentives may also be available:
Certain types of qualified retirement plans allow employees to defer a portion of their compensation, which the employer then contributes to the qualified retirement plan. Unless the Roth 401(k) option is selected, these elective employee deferrals are not included in the employee’s taxable income, meaning that they are made with before-tax dollars (see page 13 for information on the Roth 401(k) option).
Qualified retirement plan distributions may qualify for special tax treatment.
Depending on the type of qualified retirement plan, employees age 50 and over may be able to make additional “catch-up” contributions.
Low- and moderate-income employees who make contributions to certain qualified retirement plans may be eligible for a tax credit.
Small employers may be able to claim a tax credit for part of the costs in establishing certain types of qualified retirement plans.
The bottomline is that the primary qualified retirement plan tax advantages – before-tax contributions and tax-deferred growth – provide the opportunity to accumulate substantially more money for retirement, when compared to saving with after-tax contributions, the earnings on which are taxed each year.
from the Masters…
ACCELERATE YOUR ABILITIES
by Chris Widener
In today’s fast-paced life, the wins usually go to those with exceptional skills and abilities. The old quote is true, “The race is not always won by the swift and the strong, but that is the way to bet.”
With this in mind, and with your desire to become increasingly successful, here are some ways to accelerate your abilities, thus enabling you to achieve greater and greater things.
Become dissatisfied with your current state. Growth for growth’s sake is good. Those who will achieve much are those who say to themselves, “I want to grow. I want to be better. And I am willing to do what it takes to get there. This current state is not enough!” This dissatisfaction will create for you an insatiable drive to do what it takes to get your abilities to the next level.
Visualize the benefits of increased abilities. Put them at the forefront of your mind. This will saturate your mind with the motivation that it will take for you to do what it takes to increase your abilities. What good will come out of my increased ability? How will I be better off as well as the others around me? The answers to these questions act as the carrot before the horse, moving you forward.
Understand your weaknesses. If you want to improve, one of the best ways is to start with some area that you aren’t particularly good at. This is the “shoring up method.” Sometimes it is easier to improve something you aren’t good at that something you are. And the gains will still look great for your overall situation! Take some time to consider what areas you are weakest in and focus in on them for a while. The results will obviously be much more pronounced than getting better at something you have already somewhat mastered.
Attempt greater levels of what you are already good at. Another tact to take would be to stretch yourself in an area that you already have some skill and ability in. What areas do you excel in? Now understand that when you leave the weaker areas weak and make extraordinary gains in one area, then you will be moving more toward “specialist” rather than “generalist.” That is okay, but needs to fit in with your overall goals.
Commit time each day to improvement. Steady improvement is the way to go. In fact, you may not see improvement for days or weeks. You may feel like you are failing each time. But alas, eventually you will get it and your skill will increase to the next level. The key is day in, day out, spending time working on improving. Even five minutes a day equals a half hour a week, 2 hours a month. That adds up! Remember, Practice, practice, practice.
Seek out and spend time with someone who has greater ability than you. One of the best things to do to increase your ability is hang out with people who are already more skilled than you. Watching, them, studying them, interacting with them, even competing with them will make you better. As in sports, to improve, you play with people better than you, not worse. They will raise you to a new level. Who around you can you get involved with who will help you with your ability?
Take a class or hire a coach. Go to school my friend. Take a course at a local college or vocational institute. Take a class online. Hire one of the many coaches available today. Pick a specific skill you would like to improve upon and find someone who is a specialist in that area. At the very least, pick up some audio or videotapes to help you grow.
Be the tortoise, not the hare. Slow but sure. Take your time, do it right. Keep going in the right direction. Learn your craft correctly. Don’t give up quality for speed. The whole idea of acceleration is this way: Slow start, work up to high speeds, go the distance. Luckily life isn’t a sprint but a marathon!
Hope these ideas help you as you commit to accelerating your abilities!
Brought to you by:
Mark Holland, JD
Cambridge Financial Center
1942 Berkeley Street
Salt Lake City, UT 84108-3202
About our firm:
Hello, my name is Mark Holland and I thank you for your interest in learning more about the world of money. I bring a simple method to money management that can best be explained by the Japanese word “kaizen,” meaning “change for the better”. My web site, www.markhollandinsurance.com, and my monthly newsletters are chock-full of financial tips to help you understand how money works, how to take charge of the solutions to your financial and life concerns, and how exciting, liberating and satisfying provident living can be, even in this difficult economic environment.
from the Masters…
“What one skill, if you developed it, could have the greatest positive impact on your career? This is the key to your future.”
— Brian Tracy
“Learn to hide your need and show your skill.”
— Jim Rohn
“Develop the art of being exceptional.”
— Patricia Fripp
On Problem Solving
“Average people look for ways of getting away with it; successful people look for ways of getting on with it.”
— Jim Rohn
“Success is finding and doing to the best of your ability, in each moment of your life, what you enjoy most doing, what you can do best, and what has the greatest possibility of providing the means to live as you would like to live in relation to yourself and all persons you value.”
— Nido Qubein
“Success is that old ABC — ability, breaks, and courage.”
— Charles Luckman
The purpose of this newsletter is to provide information of general interest to our clients, potential clients and other professionals. The information provided is general in nature and should not be considered complete information on any product or concept described.
For more complete information, please contact my office at the phone number above.
Published by The Virtual Assistant; © 2012 VSA, LP
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