Business Retirement Plan Matrix

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1 Business Retirement Plan Matrix ELIGIBLE EMPLOYERS ELIGIBLE EMPLOYEES ADVANTAGES (for Plan Owner) 100 or fewer employees earning $5000 or more. Governmental and tax-exempt employers allowed. Any size employer. Governmental and tax-exempt employers allowed. Tax-exempt 501(c)(3) employers, e.g., educational organizations, churches, tax-exempt hospitals, schools, charities. Any size employer. Governmental and tax-exempts not allowed. Any size employer. Tax-exempts allowed. Governmental not allowed. Employees who earned at least $5000. Exclusion allowed for collectively-bargained, nonresident aliens, and employees hired during prior year. Employees who are at least 21, who worked for the employer 3 or more years in the last 5, and who received at least $450 during the year in which the contribution is made. Exclusion allowed for collectively-bargained and nonresident aliens. Employees of a public educational institution; Taxexempt 501(c)(3) organization; or a church organization. Need not cover employees working less than 1,000 hours (approximately 20 hours per week). Employees who are at least 21, and have at least one year of service. Need not cover seasonal or employees working less than 1,000 hours. Can require two year wait if employer provides immediate 100% vesting. Employees who are at least 21, and have at least one year of service. Need not cover seasonal or employees working less than 1,000 hours. 1. Minimal paperwork and expense 2. Minimal tax filing 3. Flexible contribution allowed 4. testing required 1. Minimal paperwork and expense 2. Minimal tax filing 3. Flexible contributions allowed 4. requirement to make on-going contributions 1. Employee has flexibility with salary reduction 2. Catch up provision to allow additional contribution above 25%

2 CONTRIBUTION LIMIT 1. Employer controls distributions 2. High contribution limit 3. Flexibility by combining Money Purchase and Profit Sharing plans 1. Employer controls distribution 2. Allows employees choice in investment options 3. Maximum deferral amount for employees 4. Can combine with Profit Sharing Plan $20,000 under 50 years; $17,000 over 50 years with $2000 catch-up. (100% employer 3% of compensation and $8000 for employee salary deferral.) Requires $266,666 or more to get to $16,000 maximum. $18,000 under 50 years; $19,500 over 50 years with $1500 catch-up. (100% employer 3% of compensation and $9000 for employee salary deferral.) Requires $300,000 or more to get to $18,000 maximum Employee (Employer Contribution for Employee): Lesser of 100% of compensation or $42,000 (excludable) Employer: Lesser of 25% of compensation or $42,000 (if self-employed and using net earnings method) (deductible). Employee (Employer Contribution for Employee): Lesser of 100% of compensation or $41,000 (excludable) Employer: Lesser of 100% of compensation or $41,000 (if self-employed and using net earnings method) (deductible) Lesser of 100% of compensation or $14,000. Employees 50 years or over may contribute an additional $4000 as catch-up for a total of $17,000. Employees who have been with their employer for at least 15 years may defer an extra $3000 per year. Lesser of 100% of compensation or $13,000 salary deferral limit. For employees age 50 or over, there is a $3000 catch-up provision, allowing a salary deferral limit of $16,000. Employees who have been with their employer for at least 15 years may defer an extra $3000 per year.

3 COMPENSATION 401(k) Profit Sharing: Lesser of 100% of compensation up to Money Purchase: Lesser of 100% of compensation or Total for both plans: Lesser of $42,000/100% per employee. Profit Sharing: 100% of compensation up to $41,000. Money Purchase: Lesser of 100% of compensation or $41,000. Total for both plans: $41,000/100% per employee. $14,000 salary deferral limit. For employees age 50 or over, there is a $4000 catch-up provision, allowing a salary deferral limit of $18,000. Company can add a matching contribution. Total employee/employer contribution limit is lesser of 100% of salary or $13,000 salary deferral limit. For employees age 50 or over, there is a $3000 catch-up provision, allowing a salary deferral limit of $16,000. Company can add a matching contribution. Total employee/employer contribution limit is lesser of 100% of salary or $41,000. $210,000 (for non-elective contributions equaling 2% of employee compensation) or Dollar-for-dollar match of up to 3% of employee compensation. $205,000 (for non-elective contributions equaling 2% of employee compensation) or Dollar-for-dollar match of up to 3% of employee compensation. - $210,000 - $205,000 Determining the compensation limit for a account can be complicated. See plan administrator. - $210,000 - $205,000 - $210,000 - $205,000

4 REQUIRED EMPLOYER CONTRIBUTIONS MAXIMUM EMPLOYER CONTRIBUTION PER EMPLOYEE Choice of a 2% of compensation contribution for all eligible employees (regardless of whether they defer any compensation) or a 3% of compensation matching contribution (that can go as low as 1% in 2 out of 5 years). ne - completely discretionary, but employer funds 100% of contribution in years when contributions are made. Money Purchase: Yes Profit Sharing: ne - Can add employer match, either mandatory or discretionary - $10,000 - $9,000 Employee (Employer Contribution for Employee): Lesser of 100% of compensation or $42,000 Employer: Lesser of 25% of compensation or $42,000 (if self-employed and using net earnings method) Employee (Employer Contribution for Employee): Lesser of 100% of compensation or $41,000 Employer: Lesser of 25% of compensation or $41,000 (if self-employed and using net earnings method) Extremely complex 5 step calculation. See plan administrator. Profit Sharing: Lesser of 100% of compensation up to Money Purchase: Lesser of 100% of compensation or Total for both plans: Lesser of $42,000/100% per employee. Money purchase: Lesser of 100% of compensation or $41,000 Profit Sharing: Lesser of 100% of compensation or $41,000 Total for both plans $41,000/100% per employee

5 EMPLOYEE DEFERRAL LIMIT SPECIAL INCOME TAX ISSUES Lesser of 100% of compensation or $42,000 (must include salary deferrals in test) Lesser of 100% of compensation or $41,000 (must include salary deferrals in test) - $10,000 Catch up age 50 and over of $2,000 for a total of $12,000 - $9,000 Catch up age 50 and over of $1,500 for a total of $10,500 deferrals allowed - $14,000 Catch-up for age 50 and over of $4,000, for total of $18,000 - $13,000 Catch-up for age 50 and over of $3,000, for total of $16,000 Yes, can have a 401K provision - $14,000 Catch-up for age 50 and over of $4,000, for total of $18,000 - $13,000 Catch-up for age 50 and over of $3,000, for total of $16,000 The taxation of plans is the same as under a traditional IRA; generally contributions are not taxable until withdrawn. The early tax penalty - withdrawing money before age 59 1/2 - however, is increased to 25% during the first two years of participation. After that the early withdrawal penalty is 10%. Rollovers from one to another are permitted, but rollovers to a traditional IRA are permitted without penalty only after two years of participation.

6 VESTING - An employer may contribute up to $42,000 or 100% of an employee's compensation, whichever is less, annually to each qualifying employee's IRA. The deduction limit for employers is the lesser of 25% of compensation or $40, An employer may contribute up to $41,000 or 100% of an employee's compensation, whichever is less, annually to each qualifying employee's IRA. The $41,000 whichever is less. - plan participants will be allowed to contribute up to $14,000, or up to 100% of compensation, whichever is less. For those who have employer contributions, limits are the lesser of $42,000 or 100% of compensation, however, the deduction limit for employers is the lesser of 25% of compensation or - plan participants will be allowed to contribute up to $13,000, or up to 100% of compensation, whichever is less. For those who have employer contributions, limits are either $41,000 or 100% of compensation, whichever is less but the $41,000, again, whichever is less. - Employees can contribute their full salary as long as contributions do not exceed However, the $42,000 whichever is less. - Employees can contribute their full salary as long as contributions do not exceed $41,000. However, the $41,000 whichever is less. - Employees can contribute their full salary as long as contributions do not exceed However, the $42,000 whichever is less. - Employees can contribute their full salary as long as contributions do not exceed $41,000. However, the $41,000 whichever is less. 100% immediately 100% immediately 100% for salary deferrals. For employer contribution multi-year schedule may be used.

7 PLAN YEAR IRS FILING Plan may require vesting schedule of several years. Plan may require vesting schedule of several years for company match. 100% for salary deferrals. Must be calendar year Calendar year (or the employer s fiscal year, if non-model plan is used). Calendar Year Employer s fiscal year or calendar year Employer s fiscal year or calendar year ne to IRS, However, Form 5305 must be kept on file by the business owner. Government or church based- no. Others- Form 5500 (not required if employer only permits salary deferrals and minimal employer involvement). Yes Form 5500 Yes Form 5500 October 1 DEADLINE FOR SETTING UP PLAN HARDSHIP WITHDRAWALS or By tax filing date, plus extensions By tax year- end (prior to any salary deferrals) By tax year- end By tax year-end (prior to any salary deferrals)

8 LOANS ALLOWED NON- DISCRIMINATION TESTING Yes per plan Yes per plan Yes per plan Yes Yes (applies only to employer contributions for nongovernment employers) Yes Sources: Tax Action Memo, A SIMPLE OR A SEP-WHICH SHOULD IT BE?, TAM-559, Practitioners Publishing Co., July 22, HIGHLIGHTS OF THE TAXPAYER RELIEF ACT OF 1997, Alexandra Armstrong, CFP, Better Investing October (k) PLANS, Marketing One Inc., PENSION PLANS FOR SMALL BUSINESSES, Marketing One, Inc., October 7, IRS Release : IR For Release: 10/18/02 ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF JOB CREATION AND WORKER ASSISTANCE ACT OF IRS Press Release; IR , Oct. 16, IRS Press Release; IR--127, Oct. 20,. The information provided here has been taken from third party sources and is deemed to be reliable, but is not guaranteed. It is believed to be accurate at the time of printing, but is subject to change at any time. It is provided for informational purposes only, and you should consult with a tax/legal advisor for further information. Please note that neither ING nor its agents or representatives provide tax or legal advice. CN

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