Overview

There are a number of other plans you could consider for your business.  A brief overview is included below.

Profit Sharing Plans

Profit Sharing plans are often paired with 401(k) plans.  The profit sharing contribution is a discretionary contribution made by the employer.  It can allow your key employees to receive a greater benefit (up to $45,000 total from all sources, excluding over 50 catch up contributions) than a stand alone 401(k) plan.  If designed properly, the overall benefit can be skewed toward higher paid people in your organization.  You can also use a vesting schedule to encourage people to stay with your company longer.

Money Purchase Plans

Money Purchase plans have a defined contribution limit.  They allow the employer to contribute a larger amount (up to 25% of eligible compensation) to provide key employees a larger benefit, up to the maximum allowed by law.  A vesting schedule can be used.  Generally speaking, these plans are somewhat inflexible.

SEP Plans

SEP plans are designed for self employed individuals and allow the individual to make a percentage contribution on behalf of themselves and any employees. 

Cross tested plans

These plans are special designs and can have a high set-up cost.  They can, however, skew a larger part of the benefit to the owners and key people.  They are generally a combination profit sharing and 401(k) arrangement.  They are designed to maximize the benefits for the owners and key people while minimizing the overall contribution. 

Roth Provisions

A Roth 401(k) provision can be added to an existing 401(k) plan.  This allows employees to defer their pay on an after tax basis.  The earnings do come out tax free at retirement.