Defined Contribution

IRS Tax Credits

Retirement Plans Startup Costs Tax Credit


Amount

  • 50% of the cost to establish and administer a qualified plan
  • Up to $500 per year for the first 3 plan years


Eligibility

  • 100 or fewer employees
  • At least one non-highly compensated employee (NHCE)
  • No other plan providing benefits to employees in the last 3 years


Note: you can't claim the credit and deduct the same expenses.
 

Qualified employers may claim the credit with Form 8881,
Credit for Small Employer Pension Plan Startup Costs.


Retirement Savings Contributions Credit (Saver's Credit)
 

Maximum Amount

  • $1,000; $2,000 for married couples
  • Based on contribution amount and credit rate


Eligibility

  • Low-to-moderate income worker below the applicable limits (see below)
  • Contribute elective deferrals to a qualified plan
  • At least 18 years of age
  • Cannot be a full-time student
  • Cannot be claimed as a dependent on another person's tax return


Income Limits (tax year 2016)

  • Married Filing Jointly    =     $ 61,500
  • Head of Household       =     $ 46,125
  • Single                           =     $ 30,750

 

Qualified individuals may claim the credit with Form 8880,
Credit for Qualified Retirement Savings Contributions.

Click here to find out if you qualify for the Saver's Credit.


For more tax information for retirement plans, visit irs.gov/retirement-plans.


The information provided above is for information purposes only. Blueprint Retirement Services, LLC does not provide tax advice. Consult with your accountant or tax professional for additional information or questions regarding retirement plan tax credits or deductions.
 

Profit Sharing Allocation Options

 

Pro-Rata

 

Integrated

  • Pro-Rata/Salary Ratio formulas allocate the same percentage of compensation to all plan participants
     
  • An owner receiving 20% of their salary must also contribute 20% to all eligible employees
     
  • Uniform; no flexibility
     
 

Age Weighted

  • Age Weighted formulas allow higher contributions for older employees
     
  • Equally paid employees may receive different allocations based on their ages
     
  • An older employee could receive a higher allocation than a younger owner
  • Integrated/Permitted Disparity formulas take compensation in excess of the Social Security Taxable Wage Base into account
     
  • Additional allocations are permitted for those with compensation over the integration level
     
  • Employee cost is still high
 

New Comparability

  • New Comparability/Cross-Tested/Tiered formulas can allocate different percentages of compensation to each plan participant
     
  • Owners maximize contributions while limiting the cost for employees
     
  • Most flexible
 
New Comparability allocation formulas and Cross-Testing are included in our annual administration package for no additional fee.