Client Alert Summer 98 - Quick comparison of pension plans for small businesses

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Client Alert - Summer 1998

Quick comparison* of pension plans for small businesses

Simple IRA

SEP

Simple 401(k)

Traditional 401(k)

Keogh

Companies eligible
Maximum 100 employees

All

Maximum 100 employees

All

Sole proprietor or partnership only

Employer contributions
Mandatory

Generally voluntary

Mandatory

Voluntary

Voluntary**

Maximum employer contributions
$6,000

Lesser of 15% employee compensation or $30,000

$6,000

Varies

Lesser 25% of participant's compensation or $30,0000

Vesting of Employer contributions
Full and immediate

Full and immediate

Full and immediate

Flexible

Flexible

Maximum employee contribution via salary deferral (1998)
$6,000

No deferral allowed

$6,000

$10,000

No deferral allowed

Responsibility for selection of investment alternatives
Employee

Employee

Employer

Employer

Sole proprietor or partnership

Loans
Not allowed

Not allowed

Allowed subject to IRS regulations

Allowed subject to IRS regulations

Employees only, subject to IRS regulations

Paperwork and administrative burden
Relatively low

Relatively low

Relatively low

Relatively high

Relatively high

* Pension rules contain numerous exceptions and limitations that cannot be easily or quickly summarized. This chart gives general overview only; see us for details

** A fixed-benefit Keogh is also available, and different rules apply.

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	Simple IRA	SEP	Simple 401(k)	Traditional 401(k)	Keogh
Companies eligible	Maximum 100 employees	All	Maximum 100 employees	All	Sole proprietor or partnership only
Employer contributions	Mandatory	Generally voluntary	Mandatory	Voluntary	Voluntary**
Maximum employer contributions	$6,000	Lesser of 15% employee compensation or $30,000	$6,000	Varies	Lesser 25% of participant's compensation or $30,0000
Vesting of Employer contributions	Full and immediate	Full and immediate	Full and immediate	Flexible	Flexible
Maximum employee contribution via salary deferral (1998)	$6,000	No deferral allowed	$6,000	$10,000	No deferral allowed
Responsibility for selection of investment alternatives	Employee	Employee	Employer	Employer	Sole proprietor or partnership
Loans	Not allowed	Not allowed	Allowed subject to IRS regulations	Allowed subject to IRS regulations	Employees only, subject to IRS regulations
Paperwork and administrative burden	Relatively low	Relatively low	Relatively low	Relatively high	Relatively high