Not FDIC Insured May Lose Value Not Bank Guaranteed

Transcription

1 EmployEr Er GuidE RetiRement Rement Plans for small Businesses Not FDIC Insured May Lose Value Not Bank Guaranteed

2

3 a secure future for you and your employees if you own a small company or are self-employed, 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 49% of the u.s. workforce. 1 However, only 52% of small business owners have retirement plans in place. 2 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. 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. As you read through this guide, you ll see that there have never been more or better options available to selfemployed individuals and small business owners interested in establishing a retirement plan. you ll learn about Significant advantages for you and your business A plan for every small business The experience and support of oppenheimerfunds 1. Source: SBA office of Advocacy, September 2012, sba.gov/advocacy. 2. Source: u.s. department of labor, Bureau of labor Statistics, National Compensation Survey, march RETIREMENT

4 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 owneronly 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 every year. Each of these plans, along with others, is discussed later in this guide. While each plan has its unique features, they offer: 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. RetiRement ement Plan advantage This illustration shows how much faster assets can potentially compound in a tax-advantaged 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 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. over a 20-year savings period. 3 Retirement plan 4 $46,206 15% tax bracket 28% tax bracket 35% tax bracket $33,268 $30,004 $39,275 Tax-advantaged Taxable 3. 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. 4. 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 ensure a profit or protect against losses in declining markets. 2

5 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. The cost of the plan. 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. 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. 5 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. 5. Source: irs Tax Tip , updated 5/15/ RETIREMENT

6 Available plans Suitable for most Small Businesses RolloveR Rules 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 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. 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) (2013). individual employees can defer the maximum amount, regardless of the amounts deferred by other employees. Important considerations Employer contributions are mandatory and must use one of the following plan formulas: 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 $255,000 (2013). Employer can make a nonelective contribution of 2% of compensation, regardless of whether employees choose to participate up to compensation cap of $255,000 (2013). Moving your retirement plan from one employer to another is easy. Rollovers may be made between Qualified Plans, 403(b)s, 457s, SEP IRAs and IRAs. Rollovers can be made from a SIMPLE IRA to 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 check for any plan restrictions in a provider s plan before moving your plan. must be the employer s exclusive plan. doesn t permit Social Security integration. All contributions are 100% immediately vested. 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. overall, the maximum annual contribution 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 A participant must earn at least $400,000 ($483,333 if over age 50) to receive the maximum contribution under the SimplE ira. 4

7 SEP IRA 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 $51,000 (2013), or 25% of compensation (based on the first $255,000 of compensation). 7 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. Key benefits Annual contribution percentages may vary; contributions may even be skipped altogether. Simple to establish and maintain; no government reporting. permits Social Security integration. Important considerations in general, the same percentage of compensation must be contributed for all participants. involves top-heavy testing. All contributions are 100% immediately vested. Generally difficult to exclude parttimers from eligibility. loans are not permitted. 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. 7. overall limit also applies to employers of multiple retirement plans. 5 RETIREMENT

8 PAyRoLL DEDuctIon IRA oppenheimerfunds 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 (2013). Contributions to a Coverdell Education Savings Account are limited to $2,000 (2013). Key benefits 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. Important considerations 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 ContRibutions 8 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. 8. 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

9 SIngLE K SM Single K Sm 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 part-time 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 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) (2013). Total contributions cannot exceed the lesser of $51,000 ($56,500 if age 50 or over) or 100% of compensation (based on the first $255,000 of compensation) (2013). Availability of loans and hardship withdrawals. Nondiscrimination and top heavy testing is not required. roth option available. Important considerations 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 Plus SM plan on page RETIREMENT

10 Key benefits 401(k) 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. RotH 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 (2013). 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. Allows employees to make annual pretax, salary deferral and/or roth after-tax (if permitted) contributions of up to $17,500. in addition, catchup contributions limited to $5,500 may be offered to participants age 50 or over (2013). 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 $51,000 or 100% of compensation (based on the first $255,000 of compensation) (2013). 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 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. 8

11 SAfE HARboR 401(k) 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. Important considerations Employer matching contributions are required as follows: A dollar-for-dollar match on salary deferrals up to 3% of compensation, and 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. Enhanced matching contributions are permitted. All Safe Harbor employer contributions are immediately 100% vested. requires filing of Form 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. safe HaRboR 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. 9 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. 9. 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

12 PRofIt-SHARIng 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. 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. 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 $51,000, based on the first $255,000 of compensation (2013). part-time and seasonal workers can potentially be excluded on the basis of eligibility requirements. Vesting schedule permitted. Availability of loans and hardship withdrawals. 10 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. 11 involves moderate administration and is subject to EriSA reporting requirements. 10. Not available in all plans. 11. This is generally applicable for plans that choose to use a pro rata contribution formula. 10

13 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 Key benefits 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 $51,000 or 100% of compensation (based on the first $255,000 of compensation) (2013). Same flexibility as profit-sharing plans. Contributions are not required every year and vesting schedules are permitted. loans and hardship withdrawals are also available. Important considerations more administration costs than other plans. Subject to EriSA reporting requirements. No prototype documents are available. Subject to nondiscrimination rules and top-heavy testing. 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. 11 RETIREMENT

14 new comparability 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. Key benefits 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 profitsharing plan. Same flexibility as traditional profitsharing plans. Contributions are not required every year and vesting schedules are permitted. loans and hardship withdrawals are also available. Important considerations more administrative costs than other plans. Subject to EriSA reporting requirements. No prototype documents are 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. Qualified plan options such as Age-weighted 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. Here s an example of how a New Comparability 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. Let s say you have an Internet-based marketing company made up of two directors, a writer, two account managers, two assistants and one receptionist. Your goal as a director is to benefit from as much of the plan contributions as possible and minimize the amount you have to contribute to your employees. If you were to establish a traditional Profitsharing plan, here s how it could work with a 20% allocation. Each employee gets a profit-sharing contribution equal to 20% of his or her pay, so the directors end up with 74% of the total plan contribution. But with the New Comparability solution, the directors could potentially get a larger percentage of the plan s contributions 92% of overall total plan contributions. This is a hypothetical illustration only. Due to the complexity of New Comparability plans, a tax or legal advisor should be consulted. 12

15 SuPER comparability 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. Key benefits 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 (2013). 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. Important considerations 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. traditional Profit-sharing vs. new Comparability Plans Age Salary Traditional Profit-Sharing Contributions New Comparability Contributions High Net Worth Workers Creative director 54 $255,000 $51,000 $51,000 Creative director ,000 51,000 51,000 Total $510,000 $102,000 (74% of total contributions) Rank-and-file Workers $102,000 (92% of total contributions) Web Writer 41 $50,000 $10,000 $2,500 Account manager 30 35,000 7,000 1,750 Account manager 47 29,000 5,800 1,450 marketing Assistant 27 23,000 4,600 1,150 marketing Assistant 24 23,000 4,600 1,150 receptionist 25 22,000 4,400 1,100 Total $182,000 $36,400 $9,100 Grand Total $692,000 $138,400 $111,100 The persons 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 financial advisor should be consulted. Hypothetical reflects 2013 limitations. These assumptions are for illustrative purposes only. Withdrawals prior to age 59½ are subject to taxes and penalties. This hypothetical example is not intended to show performance of any Oppenheimer fund for any period of time, or fluctuation in principal value or investment returns. Periodic investment plans do not ensure a profit or protect against a loss. Contribution calculations provided by Dedicated Defined Benefits Services, LLC. Dedicated Defined Benefits Services, LLC is not affiliated with OppenheimerFunds Distributor, Inc. Social Security Integration level in 2013 is $113, RETIREMENT

16 SIngLE Db PLuS SM 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 self-employment income and owners of one-to-five person companies may find this plan type an attractive retirement option. does this Plan Have your name on it? tip 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: Income: Status: 40 years or older High, stable annual income of $100,000 or more; the ability/desire to save over $51,000 a year for at least three years 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 Combine with the OppenheimerFunds Single K plan to access employee pretax and/or Roth strategies. Key benefits The maximum annual retirement benefit in a Single db Plus is $205,000 (2013) 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. 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. 14

17 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. Important considerations 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 Plus SM : Higher Saving Limits and Potentially Bigger Tax Advantage $200, ,000 $173, Estimated Defined Benefit Contribution Retirement Plan Contribution Limits 13 Potential Tax Savings ,000 50,000 $69,500 $51,000 $20,400 $56,500 $22,600 $51,000 $20,400 0 Single DB Plus Profit-sharing Single K (Also known as an Individual 401(k)) SEP IRA index. The maximum annual benefit in a Single db Plus Sm is generally $205,000. Annual required contributions for Single db Plus Sm 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 $255,000 per year. it also assumes that contributions will be made for a 10-year period. 13. The maximum contribution in a profit-sharing and SEp ira plan is $51,000. The maximum contribution in a Single K Sm plan is $51,000 in addition to $5,500 in catch-up contributions. 14. Assumes a combined federal/state marginal income tax rate of 40%. 15 RETIREMENT

18 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 $205,000 a year (2013). defined Benefit plans help take the guesswork out of retirement plan savings. Employees will know how much they can expect to receive at retirement. 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 Important considerations more expensive to establish and maintain. The services of an actuary are required to calculate and certify plan contributions. 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. defined ContRibution, defined benefit. what s the difference? e? 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 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

19 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 if you already offer a retirement plan, you may wish to consider ways to enhance the existing plan before establishing a new one. 2. Approximately how many people do you employ? None (owner-only and/or spouse) More than 20 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. 3. What type of employer-funded contribution do you intend to offer? None Employer discretionary Employer matching Employer basic (nondiscretionary) if your objective is to offer employer contributions and keep administration work and fees to a minimum, then consider a SEp 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 offer your employees a valuable benefit, a payroll deduction ira may be the 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

20 REtIREMEnt PLAnS At-A-gLAncE SIMPLE IRA SEP IRA Payroll Deduction IRA Single K SM 401(k) Safe Harbor 401(k) Who Can Establish? 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 No governmental agencies Self-employeds, partnerships, S-corporations, C-corporations, nonprofits No governmental agencies Maximum Eligibility Requirements 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 under age 70½ for Traditional ira Age 21 and one year of service Age 21 and one year of service Age 21 and one year of service Employer Contribution Required N/A N/A N/A N/A 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) $51,000 $5,500 ($6,500 if age 50 or over) $2,000 for Coverdell $51,000 ($56,500 if age 50 or over) $51,000 ($56,500 if age 50 or over) $51,000 ($56,500 if age 50 or over) Roth Option Available Vesting Schedule Permitted Hardship Withdrawals N/A N/A N/A N/A N/A N/A 15 N/A N/A N/A Loans N/A N/A N/A Form 5500 Filing Required Annual Fee other account fees, fund expenses and service fees may apply. N/A N/A N/A 17 $15 18 $15 18 $15 18 $15 18 Call for quote Call for quote 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

21 Profit-sharing Age-weighted New Comparability Super Comparability Single DB Plus SM Who Can Establish? 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 No governmental agencies Self-employeds, partnerships, S-corporations, C-corporations, nonprofits, governmental agencies Maximum Eligibility Requirements Age 21 and two years of service 15 Age 21 and two years of service 15 Age 21 and two years of service 15 Age 21 and two years of service 15 Age 21 and one year of service 15 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 $51,000 $51,000 $51,000 $51,000 ($56,500 if age 50 or over) $205,000 maximum annual benefit at retirement Roth Option Available Vesting Schedule Permitted Hardship Withdrawals N/A N/A N/A N/A 16 N/A Loans Form 5500 Filing Required Annual Fee other account fees, fund expenses and service fees may apply. Call for quote Call for quote Call for quote Call for quote Call for quote 19 RETIREMENT

22 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 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. SoLutIonS to HELP MEEt today S challenges 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: 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. 20

23 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 into place can seem daunting, it may be one of the best financial decisions you ll ever make. 21 RETIREMENT

24 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 out the facts on small business retirement plans so you and your financial advisor can make an informed choice for your company. 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. nextstepsteps Visit oppenheimerfunds.com Call your financial advisor Call us, Visit oppenheimerfunds.com Call Scan this code to learn more about us: Search Google Currents for OppFunds to access our timely thought leadership Visit blog.oppenheimerfunds.com Follow us: 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 dedicated defined Benefit Services, llc. dedicated defined Benefit Services, llc is not 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 CALL OPP ( ). Read prospectuses and summary prospectuses carefully before investing. oppenheimer funds are distributed by oppenheimerfunds distributor, inc. Two World Financial Center, 225 liberty Street, New york, Ny oppenheimerfunds distributor, inc. All rights reserved. Rb august 22, 2013