Workplace Retirement Plans

Flashcards covering various workplace retirement plans, including qualified (defined benefit/contribution) and non-qualified options, highlighting contribution limits and specific regulations.

Defined benefit plans

Qualified plans where the retirement benefit is defined, but the employer’s contributions can vary over time; the most common type is a pension.

Pension service period requirement

The time an employee must typically work, often $20$ years or more, before becoming eligible for benefits.

Unfunded pension liability

A situation where projected future payouts exceed the amount currently set aside by the employer for a pension plan.

Defined benefit plan taxability

Payouts are $100\%$ taxable to the retiree as ordinary income.

Defined contribution plans

Qualified plans with defined contributions where the retirement benefit is unknown because it depends on investment performance.

General tax structure of qualified plans

Includes pre-tax (deductible) contributions, tax-deferred growth, and distributions taxable as ordinary income.

401(k) plans

Qualified retirement plans available to private, for-profit employers named after section $401(k)$ of the Internal Revenue Code.

Early withdrawal penalty (401(k))

A $10\%$ penalty applied to distributions taken before age $59\,\frac{1}{2}$, in addition to ordinary income taxes.

$2026$ 401(k) employee contribution limit

The maximum amount an employee can contribute, which is $\$24,500$ for the year $2026$.

Solo 401(k) plans

Retirement plans established by self-employed individuals with no employees, though a spouse who earns income from the business can participate.

403(b) plans

Often called a tax-sheltered annuity, these are plans used by non-profit organizations, public school systems, and religious organizations.

$2026$ 403(b) employee contribution limit

The maximum amount an employee can contribute, which is $\$24,500$ for the year $2026$.

Keogh (HR-10) plans

Plans designed for smaller professional practices where the employer must contribute for eligible employees at the same percentage they contribute for themselves.

$2026$ Keogh contribution limit

The lesser of $\$72,000$ or $25\%$ of income.

Profit-sharing plans

Plans that allow an employer to share a portion of business profits with employees, offering flexibility because the employer is not required to contribute every year.

Money purchase plans

Plans similar to profit-sharing where contributions must be made every year and are not based on the company's profitability.

SEP IRAs

Simplified Employee Pension IRAs designed for smaller companies with higher contribution limits than traditional or Roth IRAs.

SIMPLE IRAs

Savings incentive match for employees IRAs designed for smaller companies with higher contribution limits than traditional or Roth IRAs.

RMD delay rule

Working individuals age $73$ or older can delay required minimum distributions indefinitely, but only for the qualified plan at their current employer.

Non-qualified plans

Plans not governed by the Employee Retirement Income Security Act (ERISA) that allow employers to discriminate and offer benefits only to selected employees like executives.

Deferred compensation plans

A type of non-qualified plan where compensation is promised in the future, often at retirement, to reduce taxable income in the deferral year.

457 plans

Non-qualified plans for government and certain non-profit employees that allow tax-deductible contributions and do not impose early withdrawal penalties.

$2026$ 457 plan contribution limit

The maximum amount an employee can contribute, which is $\$24,500$ for the year $2026$.