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2. work
3. retirement

RETIREMENT
PLANS FOR
SMALL BUSINESSES
EMPLOYER GUIDE
Not FDIC Insured
May Lose Value
Not Bank Guaranteed
RETIREMENT
A secure future for you
and your employees
If you own a small company or are selfemployed, you can be proud of being
a driving force in the United States
economy. Small, dynamic businesses
represent the heart and soul of the
entrepreneurial spirit, employing 35%
of the U.S. workforce.1
As you read through this guide,
you’ll see that there have never been
more—or better—options available
to self-employed individuals and
small business owners interested
in establishing a retirement plan.
You’ll learn about:
However, only 50% of small business
owners have retirement plans in place.1
Given the uncertainty over Social
Security, generally longer lifespans and
inflation’s threat to long-term purchasing
power, this lack of retirement coverage
is becoming an increasingly important
issue in Washington, D.C.
◆
Significant advantages for you and
your business
◆
A plan for every small business
◆
The experience and support
of OppenheimerFunds
In response, lawmakers have made
several legislative changes to retirement
plans—including allowing permanently
higher contribution limits—that can
help make it easier for small businesses
and their employees to enjoy the same
benefits that larger companies have
enjoyed for years.
1. Source: LIMRA Study Finds Less Than Half of Small Businesses Offer Employee Benefits,
January 28, 2013.
1
RETIREMENT
Significant advantages for you
and your business
Recognizing the huge impact that small
enterprises have had on new job growth,
Congress has supported a breed of
retirement plans tailored to the specific
needs of smaller ventures including
the owner-only employer. These plans,
which include SIMPLE IRAs, SEP IRAs,
Individual 401(k)s and Profit-Sharing
plans, may be suitable for small businesses looking for low cost, minimal
government regulation and/or relief from
having to contribute to a retirement plan
Each of these plans, along with others,
is discussed later in this guide. While
each plan has its unique features,
they offer:
◆
every year.
Efficient ways to shelter personal and
business income from current taxes.
◆
The ability for employees to take
advantage of tax-deferred investment
earnings to potentially accelerate
the growth of retirement savings.
◆
Tax relief for business owners.
Since employer contributions to a
retirement plan are a tax-deductible
expense, sponsoring a plan gives your
business an immediate tax break.
◆
Attractive benefits necessary to
attract, hire and keep quality employees. Workers these days not only
need employers’ support in saving
for retirement, they expect it.
No matter what type of small business
you have, you’ll find that a retirement
plan offers benefits you can’t afford to
pass up.
RETIREMENT PLAN ADVANTAGE
This illustration shows how much faster assets can potentially compound in a taxadvantaged retirement plan relative to a comparable investment in a non-tax-favored
savings vehicle. It assumes $100 of salary saved per month at an annual 6% rate of
return over a 20-year savings period.2
Retirement plan3
$46,204
$35,499
15% tax bracket
28% tax bracket
35% tax bracket
$30,070
$27,146
Tax-advantaged
Taxable
2. This hypothetical example is not intended to show the performance of any Oppenheimer fund for any period of time, nor does it show
fluctuations in principal value or investment return.
3. Assumes a fixed average annual rate of return of 6%, on a tax-deferred basis, with dividends and distributions reinvested. Withdrawals from
qualified plans prior to age 59½ may be subject to taxes and penalties. The hypothetical ending values are subject to income tax when withdrawn.
Periodic investment plans do not assure a profit or protect against losses in declining markets.
2
A plan for every small business
From Profit-Sharing and Defined Benefit
plans to Safe Harbor 401(k) and New
Comparability plans, there are retirement plans to help meet the varying
needs of different types and sizes of
small businesses.
To determine which one may be right
for you and your business, take these
factors into consideration:
◆
Flexibility and control
Today’s retirement plans give small
employers more flexibility than ever
before. This control extends to a large
number of important areas, including:
◆
◆
How the plan is funded.
The maximum amount of
contribution that can be
sheltered under the plan.
◆
Who is eligible to participate.
◆
When employees are vested.
◆
◆
◆
The degree of administration
involved.
◆
Ease of administration
Many of our small business retirement
plans have been designed to keep
administrative work to a minimum.
Although the amount of paperwork
required by each plan does vary
somewhat, you’ll find it can be easy
to establish a plan.
Cost
Few small business owners can
afford to pay high fees to implement and maintain a retirement plan.
Fortunately, many of today’s plans
are intended specifically to minimize
such expenses.
The cost of the plan.
HOW DO I OR MY EMPLOYEES QUALIFY FOR A TAX CREDIT?
To encourage more Americans to save for retirement, the government offers
special tax incentives to small business owners who establish a retirement plan
and to lower paid employees who participate in one.4 Qualifying employers
who start a plan may receive up to $500 per year in tax credits for start-up
costs for a period of up to three years. Subject to income limitations, workers
who participate may be eligible for a tax credit of up to $1,000 for contributions
made to the plan. For more details, contact your financial advisor.
4. Source: IRS Tax Tip 2011-36, updated 5/15/13.
3
RETIREMENT
Available plans suitable for
most small businesses
There are several types of retirement
plans tailored to the needs and
circumstances of self-employed
individuals and small business owners.
Here’s a brief look at each one.
SIMPLE IRA (EMPLOYERS
WITH 1–100 EMPLOYEES)
SIMPLE IRAs can be ideal for business
owners with 100 or fewer workers who
would like their employees to share
responsibility for their own retirement
savings, but who don’t want the complexity, cost and administration of a
401(k). Such businesses generally
include consumer establishments such
as stores and restaurants, professional
firms and small companies.
SIMPLE IRAs are also appropriate plans
for freelancers, independent contractors, part-timers and individuals who
earn any self-employment income from
activities outside of their full-time jobs.
Important considerations
◆
◆
Key benefits
◆
Very simple to administer; no discrimination testing or government
reporting is required by the employer.
◆
Allows employees to make annual
pretax, salary-deferral contributions
of up to $12,000 or 100% of income,
whichever is less ($14,500 if age 50
or over) (2014).
Individual employees can defer
the maximum amount, regardless
of the amounts deferred by other
employees.
◆
Employer contributions are mandatory and must use one of the following
plan formulas:
ROLLOVER RULES
◆
SEP IRAs and IRAs. Rollovers can be made from a SIMPLE IRA to
Must be the employer’s exclusive plan.
◆
Doesn’t permit Social Security
integration.
◆
All contributions are 100% immediately
vested.
◆
May include part-time and seasonal
employees.
◆
Premature additional income tax of
25% in first two years of participation.
◆
Loans are not permitted.
◆
Annual 60-day notice must be given
to all eligible employees.
any of the mentioned plans after two years of participation in the
SIMPLE IRA. Rollovers from other plan types cannot be made into
the SIMPLE IRA. It is important to carefully evaluate your options
and check for any plan restrictions in a provider’s plan before
moving your plan.
Employer can make a nonelective
contribution of 2% of compensation,
regardless of whether employees
choose to participate—up to compensation cap of $260,000 (2014).
◆
Moving your retirement plan from one employer to another is easy.
Rollovers may be made between Qualified Plans, 403(b)s, 457s,
A dollar-for-dollar match on salary
deferrals up to 3% of compensation.
This can be lowered to 1% in two
years out of any five-year period—
not limited to compensation cap of
$260,000 (2014).
◆ Overall, the maximum annual contri-
bution that can be made to a SIMPLE
IRA is low when compared to other
plans—up to $24,000, or $29,000 for
individuals age 50 or over.5
5. A participant must earn at least $400,000 ($483,333 if over age 50) to receive the maximum contribution under the SIMPLE IRA.
4
SEP IRA (ANY SIZE EMPLOYER)
Key benefits
SEPs can be ideal if you’re a selfemployed individual or small business
owner who wants a simple, easy-toadminister plan that allows you to make
annual discretionary tax-deductible
contributions to a retirement plan. For
each participant, employers are permitted to make annual tax-deductible
contributions of up to the lesser of
$52,000 (2014), or 25% of compensation (based on the first $260,000
of compensation).6
◆
Annual contribution percentages
may vary; contributions may even be
skipped altogether.
◆
In general, the same percentage of
compensation must be contributed
for all participants.
◆
Simple to establish and maintain;
no government reporting.
◆
Involves top-heavy testing.
◆
◆
Permits Social Security integration.
All contributions are 100% immediately vested.
◆
Generally difficult to exclude parttimers from eligibility.
◆
Loans are not permitted.
SEPs are also ideal for freelancers,
independent contractors, part-timers
and individuals who earn any selfemployment income from activities
outside of their full-time jobs.
Important considerations
WHAT ABOUT SOCIAL SECURITY INTEGRATION?
Retirement plans that are integrated with Social Security use a contribution
formula that takes employees’ Social Security payments into account. Using
such a formula allows higher paid employees to receive a higher contribution
percentage. If one of your goals is to maximize retirement plan benefits for key
members of your staff, Social Security integration can be advantageous.
6. Overall limit also applies to employers of multiple retirement plans.
5
RETIREMENT
PAYROLL DEDUCTION IRA
(ANY SIZE EMPLOYER)
Payroll Deduction IRA offers all business owners the opportunity to
provide a valuable employee benefit without expensive administrative
costs. This is the only retirement plan
with no employer contributions and
no employer costs. This plan simply
allows employees to have a portion of
their paycheck automatically deposited into an OppenheimerFunds IRA if
they choose. Employees can choose
to invest in an OppenheimerFunds
Traditional IRA, Roth IRA, Coverdell
Education Savings Account or invest
in all three. Contributions are limited
to $5,500, plus $1,000 in catch-up
contributions for workers age 50 or over
(2014). Contributions to a Coverdell
Education Savings Account are limited
to $2,000 (2014).
Key benefits
◆
Important considerations
No cost to you because employees
fund their IRA accounts through
payroll deductions. Fees associated
with the IRA are paid by the employee.
Such fees include annual maintenance
fees, fund expenses and service fees
if applicable.
◆
Simple to establish and maintain;
nondiscrimination testing or government reporting is not required.
◆
Anyone can participate in the Payroll
Deduction IRA plan, regardless of
company size, age or position in
the company.
◆
Can be used to complement any
employer-sponsored retirement
plans.
◆
Spousal IRAs permitted for nonworking spouses.
◆
Compared to other retirement plans,
the maximum annual contribution
to a Payroll Deduction IRA is low.
◆
Loans are not permitted.
◆
Employees are responsible for
making sure that aggregate annual
contributions to all Traditional IRAs,
Roth IRAs and Coverdell Education
Savings Accounts do not exceed
annual limits, and that they meet the
income eligibility requirements.
SPOUSAL CONTRIBUTIONS7
OppenheimerFunds allows participants to make contributions to
OppenheimerFunds IRAs on behalf of a spouse. Employees complete the
Payroll Deduction IRA application and indicate if it is a Spousal IRA. Under
Account Ownership, the employee lists the name and information of his/
her spouse. The employer’s payroll officer then sets up accounts on our
online Contribution Processing System (CPS) for the spouse and withholds
the appropriate amount from an employee’s paycheck. OppenheimerFunds
then invests the money according to the spouse’s allocation instructions.
This option is provided solely at the discretion of the employer.
7. In order to take advantage of the Spousal IRA rules for either a Traditional or Roth IRA, a husband and wife must file a joint income tax return and
the receiving spouse must have less compensation than the contributing spouse (or no compensation). Contributing spouses are not required to
establish their own IRA account in order to establish an IRA on behalf of their receiving spouse.
6
SINGLE K SM (ONE PERSON
EMPLOYER)
OppenheimerFunds’ Single KSM is a plan
designed specifically for owner-only
businesses that employ a spouse or the
owner’s immediate family members. It’s
also designed for businesses with parttime employees who are not eligible to
participate in the plan. If your business
fits this description—whether it’s a
corporation, partnership, sole proprietorship or non-profit entity—Single K
may be for you.
Key benefits
◆
Important considerations
Employers can make an overall
tax-deductible profit-sharing contribution of up to 25% of eligible payroll
(20% for self-employed individuals)
plus as much as another $17,500 in
salary deferrals ($23,000 if age 50
or over) (2014). Total contributions
cannot exceed the lesser of $52,000
($56,500 if age 50 or over) or 100%
of compensation (based on the first
$260,000 of compensation) (2014).
◆
Availability of loans and hardship
withdrawals.
◆
Nondiscrimination and top heavy
testing is not required.
◆
Roth option available.
7
◆
All contributions are immediately
100% vested.
◆
Form 5500-SF is required if an owner’s
parents, children or grandchildren
are employed or if plan assets reach
$250,000 or more across all qualified
plans or if the company is part of a
controlled group.
TIP
Want to save even more?
See our Single DB PlusSM plan on page 14.
RETIREMENT
401(k) (ANY SIZE EMPLOYER)
Key benefits
The traditional 401(k) plan is designed
for businesses of all sizes that wish to
have their employees share responsibility for retirement savings. With features
such as availability of loans and hardship withdrawals, the 401(k) is one of the
most flexible retirement plans available. As a result of these extra features,
401(k)s require more administration than
other plans.
◆
◆
Allows employees to make annual
pretax, salary deferral and/or Roth
after-tax (if permitted) contributions
of up to $17,500. In addition, catch-up
contributions limited to $5,500 may
be offered to participants age 50 or
over (2014).
Employer matching contributions
(optional). Maximum tax-deductible
employer contribution is 25% of the
compensation paid during the year
to the participants under the plan.
The overall maximum contribution
per eligible employee is the lesser of
$52,000 or 100% of compensation
(based on the first $260,000 of compensation) (2014).
ROTH 401(k
401(k): ANOTHER WAY TO SAVE TAX FREE
The Roth 401(k) feature makes it possible for employees to designate
some or all of their contributions as Roth 401(k) contributions.
Participants can save up to $17,500 in a combination of pretax and
Roth 401(k) after-tax contributions, plus another $5,500 in catch-up
contributions if they are 50 or over (2014).
Roth contributions offer several benefits:
◆
All participants are eligible.
◆
Higher contributions than a Roth IRA, with no income level restrictions.
◆
Provides extended tax-free growth. Participants make after-tax contributions now and take tax-free distributions at retirement.
◆
Provides an opportunity for you to diversify contributions and potentially hedge against years when you may be subject to higher taxes.
8
◆
Availability of loans and hardship
withdrawals.
◆
Vesting schedule permitted.
◆
Part-time and seasonal workers can
potentially be excluded on the basis
of eligibility requirements.
Important considerations
◆
Higher cost than other plans.
◆
Requires filing of Form 5500.
◆
Nondiscrimination and top-heavy
testing required.
TIP
If you prefer not taking mandatory
distribution, you can roll your Roth
401(k) account into a Roth IRA, thereby
extending the potential tax-free growth.
Speak with your financial or tax advisor
about this potential estate and tax
planning strategy.
SAFE HARBOR 401(k)
Important considerations
If you like the features of a 401(k) but
not the cumbersome nondiscrimination
plus top-heavy testing requirements
that accompany it, you may find a Safe
Harbor 401(k) to be a viable alternative. Safe Harbor 401(k) plans may be
suitable for companies with highly compensated employees who are limited
in how much they may contribute to a
401(k) because non-highly compensated employees are not participating
or contributing enough to the plan.
◆
Key benefits
◆
Highly compensated employees
can maximize contributions to the
plan each year, even if lower paid
employees contribute very little.
◆
Nondiscrimination and top-heavy
testing is automatically satisfied for
Safe Harbor employer contributions
and employee deferrals.
◆
Safe Harbor 401(k) offers all the
same benefits as the traditional
401(k) plan.
Employer matching contributions are
required as follows:
◆
◆
◆
A dollar-for-dollar match on salary
deferrals up to 3% of compensation, and
◆ Enhanced matching contributions
are permitted.
◆ All Safe Harbor employer contribu-
tions are immediately 100% vested.
◆ Requires filing of Form 5500.
50 cents on the dollar for salary
deferrals between 3% and 5% of
employee compensation.
Alternatively, a nonelective contribution of 3% of compensation for all
eligible employees, regardless of
whether or not they participate in the
plan, is required.
SAFE HARBOR 401(k
401(k)
The Safe Harbor 401(k) is one of the most flexible, low maintenance retirement
plans available. Flexibility with less administration may seem contradictory, but
it’s possible because Congress eliminated the cumbersome top-heavy rules for
Safe Harbor plans.8 Employers and their higher paid workers can tuck away the
maximum contributions permitted under the Safe Harbor plan, enjoy its flexible
plan features and, if using the matching contribution formula, not have to worry
whether lower paid workers are participating in the plan.
8. Top-heavy testing may require an employer to make a minimum contribution on behalf of non-key employees. Top-heavy rules still apply to
retirement plans such as traditional 401(k)s and SARSEPs.
9
RETIREMENT
PROFIT-SHARING (ANY SIZE
EMPLOYER)
If you like the features of a SEP IRA, but
want more control over your plan’s eligibility and vesting, and don’t mind some
additional administrative responsibilities, a traditional Profit-Sharing plan
may be a better option. Profit-Sharing
plans are suitable for businesses with
unpredictable earnings as well as those
with part-time employees and/or high
employee turnover.
Key benefits
◆
Annual contribution percentage
may vary; contributions may even
be skipped altogether. Employer is
allowed to make a tax-deductible
contribution of 25% of eligible
payroll paid during the year to the
participants under the plan. The
overall maximum contribution per
eligible employee is 100% of compensation not to exceed $52,000,
based on the first $260,000 of
compensation (2014).
MONEY PURCHASE PENSION PLANS
Adopted primarily by small businesses and self-employed individuals
who wanted to save more of their income, Money Purchase Pension
plans have been rendered obsolete by the same legislative changes
that made the Single K plan possible. You can contribute as much to
a Profit-Sharing plan as you can to a Money Purchase Pension plan.
What’s more, unlike a Money Purchase Pension plan, Profit-Sharing
plan contributions are discretionary rather than mandatory—giving
employers more flexibility.
9. Not available in all plans.
10. This is generally applicable for plans that choose to use a pro rata contribution formula.
10
◆
Part-time and seasonal workers can
potentially be excluded on the basis
of eligibility requirements.
◆
Vesting schedule permitted.
◆
Availability of loans and hardship
withdrawals.9
◆
Permits Social Security integration.
Important considerations
◆
In general, if the employer chooses
to make a contribution to the plan, the
same percentage of compensation
must be contributed on behalf of all
participants.10
◆
Involves moderate administration
and is subject to ERISA reporting
requirements.
Non-traditional profit-sharing plans and
other options for small businesses with older,
higher compensated employees
Profit-Sharing plans are available in
several variations that are suitable for
a wide variety of employers, including
corporations, partnerships and sole
proprietorships. Age-Weighted, New
Comparability and Super Comparability
plans offer all the benefits of traditional
Profit-Sharing plans with a 401(k)
feature (401(k) plans), plus greater
flexibility. They allow you to make larger
contributions to older, higher paid owners and employees. This is because the
plan contributions are based on benefits at retirement age, not on allocations
of contributions to the plan. Briefly,
here’s how each of them works.
AGE-WEIGHTED
If you’re a small company with one or
more key employees who are older
and more highly paid than the rest of
the workforce, an Age-Weighted plan
may be suitable for you. With an AgeWeighted plan, contributions are based
on a formula that takes age, as well as
compensation, into account. As a result,
employees with fewer years left until
they retire receive larger contributions
than their younger counterparts.
Key benefits
◆
◆
Important considerations
Contributions for older employees
may be considerably higher than
those made for younger employees.
Each year, you’re allowed to make a
tax-deductible contribution of 25%
of eligible payroll paid during the year
to the participants under the plan.
The overall maximum contribution
per eligible employee is the lesser
of $52,000 or 100% of compensation (based on the first $260,000 of
compensation) (2014).
◆
More administration costs than
other plans.
◆
Subject to ERISA reporting
requirements.
◆No prototype documents are available.
◆Subject
to nondiscrimination rules and
top-heavy testing.
Same flexibility as Profit-Sharing
plans. Contributions are not required
every year and vesting schedules are
permitted. Loans and hardship withdrawals are also available.
11
RETIREMENT
NEW COMPARABILITY
Key benefits
New Comparability plans take AgeWeighted plans a step further. Rather
than allocate contributions according to
a formula based solely on age and compensation, New Comparability plans
enable you to categorize employees by
a variety of criteria including ownership,
tenure, age and job function. Each category may then receive a different
contribution percentage.
◆
◆
Important considerations
Employees are grouped as
“Preferred” or “Non-Preferred” with
the Preferred group(s) receiving a
greater portion of the employer’s
overall plan contribution. The contribution limits are the same as those
of a traditional Profit-Sharing plan.
◆
More administrative costs than
other plans.
◆
Subject to ERISA reporting
requirements.
◆
No prototype documents are
available.
Same flexibility as traditional ProfitSharing plans. Contributions are
not required every year and vesting schedules are permitted. Loans
and hardship withdrawals are
also available.
◆
Subject to top-heavy testing and
nondiscrimination rules.
◆
The IRS has issued regulations
that provide specific allocation
rates for New Comparability plans.
Please contact your tax advisor for
more information.
THE WEALTHY ENTREPRENEUR
If you’re a high net worth business
owner whose primary objective is to
maximize the benefit you and your higher
paid workers receive under the plan,
OppenheimerFunds can help you identify
an appropriate solution for you.
Here’s an example of how a Non-Traditional
Retirement Plan can help you to provide a
benefit to your rank-and-file workers while
maximizing the plan’s benefit for a core
group of employees—usually your high net
worth workers.
Qualified plan options such as AgeWeighted and New Comparability
profit-sharing plans, as well as Defined
Benefit plans, offer you a great opportunity
to save substantial amounts of money in a
shorter period of time. And thanks to legislation changes, the increased amounts
that may be contributed to these plans
have been made permanent.
Let’s say you own a medical practice,
made up of two doctors, two nurses, three
assistants and one receptionist. Your goal
as the owner of the practice is to benefit
from as much of the plan contributions
as possible and minimize the amount you
have to contribute to your employees.
12
Refer to our hypothetical illustration on the
following page for an illustration of how a
profit-sharing contribution can vary using
the different types of retirement plans.
Due to the complexities of some of these
calculations, a tax advisor or recordkeeper
should be consulted.
SUPER COMPARABILITY
Key benefits
Many companies that have faced
challenges meeting nondiscrimination
testing and top-heavy requirements
have found the new Super Comparability
plan to be a welcome addition to
their retirement plan options. Super
Comparability plans combine aspects
of Safe Harbor 401(k) plans and New
Comparability plans to provide the ability to make maximum contributions for
highly compensated employees.
◆
◆
◆
◆
Important considerations
Allows employees to make annual
401(k) pretax salary deferrals of up
to $17,500. Participants age 50 or
over can contribute an additional
$5,500 (2014).
Nondiscrimination and top-heavy
testing is not required if all contributions are made solely in accordance
with Safe Harbor.
Discretionary profit-sharing contribution is permitted.
Enables maximum salary deferrals for
highly compensated employees.
◆
More administration costs than
other plans.
◆
Subject to ERISA reporting requirements and IRS-required annual notice
to participants.
◆
Safe Harbor employer contributions
required annually.
◆
Safe Harbor employer contributions
are 100% immediately vested.
◆
Discretionary profit-sharing
contributions are still subject
to nondiscrimination rules and
top-heavy testing.
Less overall profit-sharing contributions made to
the plan and contributed to rank-and-file workers.
Traditional vs. Non-Traditional Profit-Sharing Plan Allocations
Contributions
Traditional Profit-Sharing Plans
20% Pro Rata
Integrated with
Social Security
Non-Traditional Profit-Sharing Plans
Age
Salary
Doctor 1
54
$260,000
$52,000
$52,000
$52,000
$52,000
Doctor 2
45
$260,000
$52,000
$52,000
$23,994
$52,000
$520,000
$104,000
$104,000
$75,994
$104,000
Age Weighted
New Comparability
High Net Worth Workers
Total
Rank-and-File Workers
Nurse 1
41
$50,000
$10,000
$8,421
$3,463
$2,500
Nurse 2
30
$35,500
$7,100
$5,979
$1,002
$1,775
Assistant 1
47
$29,000
$5,800
$4,884
$3,277
$1,450
Assistant 2
27
$23,000
$4,600
$3,874
$508
$1,150
Assistant 3
24
$23,000
$4,600
$3,874
$398
$1,150
Receptionist
25
$22,000
$4,400
$3,704
$413
$1,100
Total
$182,500
$36,500
$30,736
$9,061
$9,125
Grand Total
$702,500
$140,500
$134,736
$85,055
$113,125
The individuals portrayed in these examples are fictional. This material does not constitute a recommendation as to the suitability of any investment
for any person or persons having circumstances similar to those portrayed and a tax or financial advisor should be consulted. Hypothetical reflects
2014 limitations. Contribution calculations provided by Verisight, Inc. Verisight, Inc. is not affiliated with OppenheimerFunds Distributor, Inc.
13
RETIREMENT
SINGLE DB PLUS SM
Key benefits
Single DB Plus SM is a retirement savings alternative for high income earners
that offers the highest deductible
contributions—potentially higher limits
than a 401(k), Profit-Sharing, SEP
IRA or SIMPLE IRA plan. Independent
professionals, individuals with selfemployment income and owners
of one-to-five person companies
may find this plan type an attractive
retirement option.
◆
The maximum annual retirement
benefit in a Single DB Plus is $210,000
(2014)—the annual contribution
required to fund that benefit can be
as much as four times more than you
can contribute to other plan types.
Contributions made to a Single DB
Plus are determined by an actuary
and will vary according to an individual’s income, age, circumstances
and objectives.
DOES THIS PLAN HAVE YOUR NAME ON IT?
If you fit the following profile, OppenheimerFunds’ Single DB Plus
may be a terrific way for you to build your retirement assets in just
a few years.
Age:
40 years or older
Income:
High, stable annual income of $100,000 or more;
the ability/desire to save over $52,000 a year for
at least three years
Status:
Self-employed individuals; business owners with
one to five employees; employees who have income
from a side business; self-employed spouses of high
income earners
TIP
Combine with the OppenheimerFunds’
Single K plan to access employee pretax
and/or Roth strategies.
14
◆
Since employer contributions are a
tax-deductible business expense,
the more you contribute for retirement, the more your business saves
in taxes.
◆
Access to a wide variety of
investments, including Oppenheimer
funds and as much as 30% to nonOppenheimerFunds-sponsored
investments.
◆
With your larger base of contribution dollars, this plan’s tax deferral
of investment income can accelerate the growth of your retirement
nest egg.
◆
Within parameters set by the actuary
you decide how much you contribute, where you put your money and
what you do with your savings when
you retire.
◆
◆
◆
Important considerations
The contributions you make and
invest through Single DB Plus are
aimed at accumulating sufficient
assets to produce a specific level
of income at retirement. However,
generally at plan termination the
accumulated assets are rolled into
an IRA.
Single DB Plus may be combined with
a Single K for additional flexibility and
higher contributions for many business owners.
Contributions are not limited to a
specific percent of compensation.
◆
More expensive to establish and
maintain. Administration is handled
by a qualified service provider.
◆
Plan contributions are mandatory.
◆
Employer bears the burden of
market fluctuations.
◆
Subject to ERISA reporting
requirements.
◆
May require coverage by Pension
Benefit Guaranty Corporation.
Single DB PlusSM: Higher Saving Limits and Potentially Bigger Tax Advantage
$200,000
$183,000
2014 Estimated Defined Benefit Contribution11
2014 Retirement Plan Contribution Limits12
Potential Tax Savings13
150,000
100,000
$73,200
$57,500
$52,000
50,000
$20,800
$52,000
$23,000
$20,800
0
Single DB Plus
Profit-Sharing
SEP IRA
Single K
(Also known as an
Individual 401(k))
11. 2014 Index. The maximum annual benefit in a Single DB PlusSM is generally $210,000. Annual required contributions for Single DB PlusSM are
determined by an actuary and will vary according to an individual’s income, age and circumstances. This illustration was provided by Dedicated
Defined Benefit Services, LLC. and assumes the maximum benefit payable at retirement age 62 for a 52-year-old business owner earning
$260,000 per year. It also assumes that contributions will be made for a 10-year period.
12. The maximum contribution in a Profit-Sharing and SEP IRA plan is $52,000. The maximum contribution in a Single KSM plan is $52,000 in
addition to $5,500 in catch-up contributions.
13. Assumes a combined federal/state marginal income tax rate of 40%.
15
RETIREMENT
DEFINED BENEFIT
Defined Benefit plans, as their name
implies, aim to accumulate sufficient
assets to provide a specific benefit at
retirement. Based on the way Defined
Benefit plans are funded, they can be
ideal for companies with older employees who wish to accumulate assets
rapidly over a shorter period of time.
They also can be appropriate for
high revenue companies and smaller
employers that can afford to make
higher contributions.
Key benefits
◆
No other qualified plans allow for
higher contribution levels than
Defined Benefit plans.
◆
◆
◆
Maximum retirement benefit is 100%
of average compensation for the
three consecutive years in which
the participant’s compensation was
the highest, up to a maximum of
$210,000 a year (2014).
Important considerations
◆
More expensive to establish and
maintain. The services of an actuary
are required to calculate and certify
plan contributions.
Defined Benefit plans help take the
guesswork out of retirement plan
savings. Employees will know how
much they can expect to receive at
retirement.
◆
Annual plan contributions are
required.
◆
Plans must be monitored each year to
ensure that the funding stays on target. Plans can be amended to lower
or raise the benefit. The benefit of the
plan must be paid, regardless of how
the plan’s investments perform.
◆
Subject to ERISA reporting
requirements.
◆
May require coverage by Pension
Benefit Guaranty Corporation.
It is possible to contribute 100%
of employee compensation up to
$17,500 or ($23,000 with catch up at
age 50 or over) plus an employer contribution of up to 6% of compensation
to a 401(k) plan, such as a Single K,
and still fund a Defined Benefit plan.14
DEFINED CONTRIBUTION, DEFINED BENEFIT. WHAT’S THE DIFFERENCE?
Defined contribution plans (like a profit-sharing or 401(k) plan) specify the funding formula
used to determine a plan’s annual employer contribution, but don’t stipulate a specific benefit
at retirement. The savings an employee ends up with at retirement depends on how the plan’s
investments performed over time. Defined benefit plans (like a traditional corporate pension)
promise a certain benefit based on a formula that generally takes into account an employee’s
age, salary and years of service. The risk of investing plan funds to produce the guaranteed
benefit is borne by the employer.
14. Maximum funding will vary with total eligible payroll.
16
Evaluate Your Company’s Needs Worksheet
As you can see, each of the plans
discussed has a unique combination of
features. Your financial, tax and business
situation will dictate which plan options
are appropriate for your consideration.
Take a moment to answer the following
questions to help you start thinking about
which retirement plan may be best for
your business. After you’ve completed
the questionnaire, bring it with you when
you speak with your financial advisor. He
or she can use this as a starting point
toward helping you identify the plan that
best meets your needs and objectives.
1. Do you currently have a retirement
plan?
Yes. Please specify type of plan
_____________________________________
No
3. What type of employer-funded
contribution do you intend to offer?
None
Employer discretionary
Employer matching
If you already offer a retirement plan, you
may wish to consider ways to enhance the
existing plan before establishing a new
one.
Employer basic (nondiscretionary)
If your objective is to offer employer contributions and keep administration work and
fees to a minimum, then consider a SEP
2. Approximately how many people
do you employ?
None (owner-only and/or spouse)
1–9
or SIMPLE plan. However, if your goal is to
provide contributions for specific groups
of employees, a qualified plan such as
a 401(k) or Profit-Sharing plan may be
the better choice. If you do not plan to
offer employer contributions but want to
10–20
offer your employees a valuable benefit,
More than 20
a Payroll Deduction IRA may be the
If yours is an owner-only business, then
a SEP, Single K or Single DB Plus may be
appropriate for you. If you have several
employees, a SEP, SIMPLE (less than
100 employees), 401(k) or Profit-Sharing
plan may be a better alternative.
best choice.
4. Which is a higher priority:
administrative simplicity and low
cost, or plan design flexibility?
Simplicity and low cost
Consider implementing a SEP or
SIMPLE plan. These plans tend to have
fewer administrative complexities.
However, the trade-off is that such plans
are less flexible in terms of plan design.
Plan design flexibility
If you understand and are willing to take
on the responsibility of running a more
complex plan, and if design flexibility is
a priority, then you should consider a
401(k) or Profit-Sharing plan.
17
RETIREMENT
RETIREMENT PLANS AT-A-GLANCE
Who Can
Establish?
Maximum
Eligibility
Requirements
Employer
Contribution
Required
SIMPLE IRA
SEP IRA
Payroll
Deduction IRA
Single KSM
401(k)
Safe Harbor
401(k)
Self-employeds,
partnerships,
S-corporations,
C-corporations,
nonprofits,
governmental
agencies
Self-employeds,
partnerships,
S-corporations,
C-corporations,
nonprofits,
governmental
agencies
Self-employeds,
partnerships,
S-corporations,
C-corporations,
nonprofits,
governmental
agencies
Self-employeds,
partnerships,
S-corporations,
C-corporations,
nonprofits,
governmental
agencies
Self-employeds,
partnerships,
S-corporations,
C-corporations,
nonprofits
Self-employeds,
partnerships,
S-corporations,
C-corporations,
nonprofits
No governmental
agencies
No governmental
agencies
Employees
earning
$5,000 in the
current year and
$5,000 in any
two preceding
years
Age 21 and
service with
employer in any
three out of the
last five years
with $500 in
earnings
Earned Income
Age 21 and one
year of service
Age 21 and one
year of service
Age 21 and one
year of service
N/A
N/A
N/A
N/A
✓
Under age 70½
for Traditional IRA
✓
Employee
Deferral Limit
$12,000
($2,500 age 50
catch up)
N/A
$5,500
($6,500 age 50
catch up)
$2,000 for
Coverdell
$17,500
($5,500 age 50
catch up)
$17,500
($5,500 age 50
catch up)
$17,500
($5,500 age 50
catch up)
Overall
Maximum
Contribution
$24,000
($29,000 if age
50 or over)
$52,000
$5,500
($6,500 if age 50
or over)
$2,000 for
Coverdell
$52,000
($56,500 if age
50 or over)
$52,000
($56,500 if age
50 or over)
$52,000
($56,500 if age
50 or over)
Roth Option
Available
N/A
N/A
✓
✓
✓
✓
Vesting
Schedule
Permitted
N/A
N/A
N/A
N/A
✓
✓16
Hardship
Withdrawals
N/A
N/A
N/A
✓
✓
✓
Loans
N/A
N/A
N/A
✓
✓
✓
Form 5500
Filing Required
N/A
N/A
N/A
✓17
✓
✓
Annual Fee
$1518
$1518
$1518
$1518
Call for quote
Call for quote
Other account
fees, fund
expenses and
service fees
may apply.
15. Requiring two years of service mandates 100% immediate vesting.
16. Vesting schedule available for discretionary employer contributions only.
17. Form 5500 required for ERISA “one-participant” plans if an owner’s parents, children or grandchildren are employed, if plan assets reach
$250,000 or more across all qualified plans or if the company is part of a controlled group.
18. If the total value of the participant’s OppenheimerFunds accounts is $50,000 or more, the annual custodial fee is just $10. The fee is
assessed once, regardless of how many Oppenheimer funds are invested in the plan.
18
Profit-Sharing
Age-Weighted
New
Comparability
Super
Comparability
Self-employeds,
partnerships,
S-corporations,
C-corporations,
nonprofits,
governmental
agencies
Self-employeds,
partnerships,
S-corporations,
C-corporations,
nonprofits,
governmental
agencies
Self-employeds,
partnerships,
S-corporations,
C-corporations,
nonprofits,
governmental
agencies
Self-employeds,
partnerships,
S-corporations,
C-corporations,
nonprofits
Maximum
Eligibility
Requirements
Age 21 and two
years of service15
Age 21 and two
years of service15
Age 21 and two
years of service15
Age 21 and two
years of service15
Employer
Contribution
Required
N/A
N/A
N/A
Employee
Deferral Limit
N/A
N/A
N/A
$17,500
($5,500 age 50
catch up)
N/A
Overall
Maximum
Contribution
$52,000
$52,000
$52,000
$52,000
($57,500 if age
50 or over)
$210,000
maximum
annual benefit
at retirement
Roth Option
Available
N/A
N/A
N/A
Vesting
Schedule
Permitted
✓
✓
✓
✓16
Hardship
Withdrawals
✓
✓
✓
✓
N/A
Loans
✓
✓
✓
✓
✓
Form 5500
Filing Required
✓
✓
✓
✓
✓
Who Can
Establish?
Annual Fee
Call for quote
Call for quote
No governmental
agencies
✓
✓
Call for quote
Call for quote
Single DB PlusSM
Self-employeds,
partnerships,
S-corporations,
C-corporations,
nonprofits,
governmental
agencies
Age 21 and one
year of service15
✓
N/A
✓
Call for quote
Other account
fees, fund
expenses and
service fees
may apply.
19
RETIREMENT
The experience and support
of OppenheimerFunds
No matter what type of retirement plan
you establish, you can do so knowing that each one is supported by a
strong, tested industry leader dedicated
to providing solutions to help meet
investors’ needs.
DRIVEN BY OUR VALUES
OppenheimerFunds has become one
of the most recognized, trusted financial services companies by adhering to
our core corporate values—passion,
collaboration, integrity and excellence.
These reflect our belief that success is
measured equally by what we achieve
and how we achieve it.
HIGH CONVICTION ACTIVE
MANAGEMENT
SOLUTIONS TO HELP MEET
TODAY’S CHALLENGES
Our disciplined investment process
and experienced management teams
combine the power of a sharply focused
boutique environment with the support of independent risk management
oversight. From our core fund teams to
those who manage our range of powerful diversifiers, OppenheimerFunds’
investment professionals are organized
into independent teams that specialize
in one area of the market. This approach
yields innovative investment ideas and
translates into low securities overlap
from fund to fund.
While all investors want solid performance, each has unique goals that may
shift over time. That’s why we offer a full
range of financial strategies, including
several retirement plans highlighted in
this guide. To help you reach important
objectives, such as helping employees
save for retirement, we offer:
◆
◆
◆
20
Expert support OppenheimerFunds
will provide in-depth consultation
and analysis to help you choose an
appropriate plan, plus guidance and
assistance throughout the enrollment
process.
Attractive pricing We strive to deliver
top quality products and services at
highly competitive costs and offer small
business owners several desirable features, including share class flexibility.
Convenience To make
OppenheimerFunds-sponsored
retirement plans easier to use, we
provide online account access, easyto-read statements and access to
the Contribution Processing System,
which will help you manage plan contributions more efficiently.
A smart decision for today—
and tomorrow
Now’s the time to give yourself and
your employees all the tax and savings advantages a retirement plan can
provide. Though putting a plan in place
can seem daunting, it may be one
of the best financial decisions you’ll
ever make.
21
RETIREMENT
There have never been more compelling
reasons for small businesses to establish a
retirement plan—or more options available
to owners seeking to do so. This guide lays
NEXTSTEPS
NEXT
STEPS
out the facts on small business retirement
Visit oppenheimerfunds.com
plans so you and your financial advisor can
Call your financial advisor
make an informed choice for your company.
Call us, 800.835.7305
Inside, you’ll learn about:
◆
Significant potential advantages
for you and your business
◆
A plan for every small business
◆
The experience and support
of OppenheimerFunds
Talk to your advisor today about the
benefits of implementing a retirement plan
for your business.
Visit oppenheimerfunds.com | Call 800.835.7305
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Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any
other agency, and involve investment risks, including the possible loss of the principal amount invested.
This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice, or for use to avoid
penalties that may be imposed under U.S. federal tax laws. Contact your attorney or other advisor regarding your specific legal, investment or tax situation.
Certain contribution information and calculations were provided by Verisight, Inc. and Dedicated Defined Benefit Services, LLC. Neither Verisight, Inc.
nor Dedicated Defined Benefit Services, LLC is affiliated with OppenheimerFunds Distributor, Inc.
Before investing in any of the Oppenheimer funds, investors should carefully consider a fund’s investment objectives, risks, charges and
expenses. Fund prospectuses and summary prospectuses contain this and other information about the funds, and may be obtained by
asking your financial advisor, visiting oppenheimerfunds.com or calling 1.800.CALL OPP (225.5677). Read prospectuses and summary
prospectuses carefully before investing.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc.
225 Liberty Street, New York, NY 10281-1008
© 2014 OppenheimerFunds Distributor, Inc. All rights reserved.
RB0000.028.0514
June 18, 2014