• open panel

Special Pay

Participant Access

SPECIAL PAY Plan

Employer SPECIAL PAY Plan adds tax benefits to payments of retiree special compensation

“Special Forms of Compensation” are not nearly as special as they should be when FICA and other taxes are allowed to diminish the value of this important employee benefit. Both employers and employees can avoid the bite of taxation with Precision Retirement Group’s SPECIAL PAY PROGRAM. Employees enjoy added benefits – because with SPECIAL PAY, they gain control over the timing of cash distributions and the timing of their tax obligations.
Normally, Special Forms of Compensation are paid out as taxable earned income that is reported on the standard W-2 form. Our SPECIAL PAY PROGRAM converts that compensation to an employer defined contribution plan at the time of retirement – with the all of the tax benefits that go along with a qualified plan. Special Forms of Compensation that are eligible for our SPECIAL PAY PROGRAM include accumulated sick leave, vacation pay and retirement stipend pay-outs.

Precision Retirement Group offers two SPECIAL PAY PLAN options designed to meet the requirements of different employer entities.

Option 1 Provides IRC Section 401(a) Benefits
This SPECIAL PAY option allows government entities in most states to contribute up to 100% of an employee’s last full year’s compensation or $46,000,whichever is less, to the employee’s 401(a) plan in a way that it will become an employer qualified plan at retirement. The maximum contribution to the 401(a) account does not affect employer contributions to other types of qualified defined benefit plans because the maximum contributions are treated separately under the limits established by IRC Sec.415.

Option 2 Provides IRC Section 403(b) Benefits
Our second option allows qualified educational institutions and certain other non-profit entities and in States not allowing 401(a) plans to make contributions into an employer sponsored 403(b) plan of 100% of the employee’s final year compensation or $46,000, whichever is less. The amount of these contributions must be reduced by any employee voluntary salary reductions into their personal 403(b) plans in the current year.
The 403(b) plan Contributions can continue as much as $46,000 a year for up to an additional five years after an employee has terminated employment, enabling the employee to shelter as much as $230,000 from federal, state and FICA taxes.

Option 3 Provides IRC Section 457 Benefits – Municipalities & School Districts
Our third option allows governmental entities, qualified educational institutions and certain other non-profit entities to make contributions into an employer sponsored 457 plan up to 100% of the employee’s final year compensation or $45,000, – whichever is less. The amount of these contributions must be reduced by any employee voluntary salary reductions into their personal 457 plans in the current year. Please note, contributions to 457 Plans do not reduce the FICA tax obligations for the employer or the employee.

Combine both plans to maximize annual contribution

401(a)
403(b)
457
Total
Salary $50,000
Maximum Contribution
$46,000
$46,000
$46,000
Less Individual 403(b) Salary Reductions
($15,500)
($15,500)
Eligible 1st Year Contributions
$46,000
$30,500
$30,500
$107,000
Five years additional 403(b) contributions
(5 x $46,000) = $230,000
$337,000
Total Combined

Maximize shelter potential when you combine both options

To get the most benefit from these two SPECIAL PAY options, Precision Retirement Group recommends that educational institutions which provide multi-year payouts of accumulated sick leave or retirement stipends combine the use of Option 1 for 401(a) along with Option 2 for 403(b).By implementing a 401(a) plan for the final year of employment and a 403(b) plan starting the first year immediately after termination, employers can avoid unnecessary maximum contribution calculations and employees can achieve the maximize shelter potential.

SPECIAL PAY Advantages

For the Employer:

  • Immediate tax savings of 7.65% – (401(a) & 403(b) Only)
  • Reduced administrative time

For the Employee

  • No cost to implement
  • Three options:
    1. Liquidate account(s) at retirement and pay regular income taxes
    2. Stay invested in the Plan and enjoy continued tax deferral
    3. Roll-over to another plan such as an IRA or TSA
  • No sales,surrender or rollover charges

At retirement,your employees deserve every hard earned benefit dollar. Help them maximize the value of their benefits with Special Pay Plans.

For more information Contact: Precision Retirement Group, Inc.
National: 800.238.9101
West Coast: 800.369.9461
East Coast: 888.458.3902

Copyright © 2009 Precision Retirement Group, Inc. All rights reserved.
Web Design by Nuesion.com and Web Hosting by Nuesion.net