Copyright NH Hicks

NH HICKSLegal and Pension Consultants

Experience Counts

Qualified Plans in Today’s Environment

Defined Contribution Plans

2017

Copyright NH Hicks

Copyright NH Hicks

Design Highlights

• Eligibility – 30% class exclusion• Include Spouse• New comparability plans – older owners• 401(k) testing – safe harbors• Uni(k) vs. SEP• Defined Benefit 40-60-5 Rule• Roth 401(k)• Fee Disclosure and Offsets

Copyright NH Hicks

DEFINED BENEFIT DEFINED CONTRIBUTION

TRUST• Deposits not taxed to employee

• Tax Deferred Growth

• Protected from creditors

Copyright NH Hicks

TRUST

MATCH 401(m)

PROFIT SHARING401(k)

ELIGIBILITYENTRY VESTING

ALLOCATION METHODS

DISCRIMINATION TESTING

SAFE HARBOR

Copyright NH Hicks

TRUST

ELIGIBILITY Age 21 1 Year 1000 hours a year Union Employees Non Resident Aliens 30% NHC job class

ENTRY DATES

VESTING

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Distributions

TRUST

100% VESTED UPON• Death• Retirement• Disability

TERMINATIONS

LOANS

HARDSHIPS

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Table of Limits

2016 2017

COMPENSATION LIMIT plan year beginning 265,000 270,000

DC ANNUAL ADDITION LIMIT plan year ending 53,000 54,000

401(k) DEFERRAL LIMIT calendar year 18,000 18,000

CATCH-UP DEFERRAL LIMIT calendar year 6,000 6,000

HIGHLY COMPENSATED EMPLOYEE Compensation definition only required to be met in prior plan year1) Over 5% owner2) Any employee (may limit to top 20%): 120,000 120,0003) Spouse or linear relation

KEY EMPLOYEE Employee is key if meets definition in current plan year1) Over 5% owner2) Over 1% owner: 150,000 150,0003) Officer (count at least 1): 170,000 175,0004) Spouse or linear relation

TAXABLE WAGE BASE 118,500 127,200

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Allocation Methods

TRUST

ALLOCATION

• Proportional• SS Integration• Age Weighted• New Comparability

Profit Sharing0-25%

eligible compensation

Copyright NH Hicks

Allocation Comparisons

AssumptionsAge Salary*55 $50,00050 50,000*45 50,00040 50,00035 50,00030 50,00025 50,000

$350,000

25% SalaryProportional

$12,50012,50012,50012,50012,50012,50012,500

$87,500

Copyright NH Hicks

Allocation Comparisons

AssumptionsAge Salary*55 $50,00050 50,000*45 50,00040 50,00035 50,00030 50,00025 50,000

$350,000

25% SalaryProportional

$12,50012,50012,50012,50012,50012,50012,500

$87,500

AgeWeighted

$31,09820,68113,7549,1476,0834,0462,691

$87,500

Copyright NH Hicks

Allocation Comparisons

AssumptionsAge Salary*55 $50,00050 50,000*45 50,00040 50,00035 50,00030 50,00025 50,000

$350,000Required to pass Average Benefits Test

25% SalaryProportional

$12,50012,50012,50012,50012,50012,50012,500

$87,500

AgeWeighted

$31,09820,68113,7549,1476,0834,0462,691

$87,500

NewComp$28,750

6,00028,7506,0006,0006,0006,000

$87,500

Copyright NH Hicks

TRUST

MATCH 401(m)

PROFIT SHARING401(k)

ELIGIBILITYENTRY VESTING

ALLOCATION METHODSSAFE HARBOR

100% up to $18,000(age 50 - $6,000 catch-up)

DISCRIMINATION TESTING

Roth 401(k)

• Top-heavy• ADP Test

Copyright NH Hicks

Discrimination Tests

40%- non-key

60%+ key

Top-heavy ADP TestTypically NHC avg. + 2% = HC max avg.

NHC %5

1005

5% avg. + 2% = 7% max HC avg.

Prior year method on first plan year3% assump. + 2% = 5%

Copyright NH Hicks

Employee Compensation Deferral

Orville $100,000 $18,000 (18.0%)

Wilbur 100,000 3,500 (3.5%)(21.5% / 2 = 10.75% HC Average)

Richthofen $50,000 $5,000 (10%)

Amelia 50,000 0 (0%)

Doolittle 50,000 2,500 (5%)(15% / 3 = 5% NHC Average)NHC Average 5% + 2 = 7% FAIL

No Joy Corporation

Copyright NH Hicks

Employee Compensation Deferral 3% PS

Orville $100,000 $18,000 (18.0%) $3,000

Wilbur 100,000 3,500 (3.5%) 3,000(21.5% / 2 = 10.75% HC Average) $6,000

Richthofen $50,000 $5,000 (10%) $1,500

Amelia 50,000 0 (0%) 1,500

Doolittle 50,000 2,500 (5%) 1,500(15% / 3 = 5% NHC Average)NHC Average 5% + 2 = 7% FAIL

$4,500

EMPLOYER REQUIRED $4,500 - $10,500

Top-Heavy

No Joy Corporation

Copyright NH Hicks

TRUST

ELIGIBILITY ENTRY VESTING

ALLOCATION METHODS

DISCRIMINATION TESTING• ADP Test• Top-heavy

SAFE HARBOR•100% VESTED•NEW PLANS MUST EXIST FOR AT LEAST 90 DAYS•TERMINATED PARTICIPANTS RECEIVE CONTRIBUTION

3% Contribution4% Match

MATCH 401(m)

PROFIT SHARING401(k)

100% up to $18,000(age 50 - $6,000 catch-up)

Copyright NH Hicks

4% Match vs. 3% PS Safe Harbor

Compensation 401(k) Match 4%ER Cost

TotalOwner $270,000 $18,000 $10,800 $28,800Spouse 20,000 18,000 800 18,800EE1 50,000 2,000 2,000 2,000EE2 50,000 2,000 2,000 2,000EE3 50,000 2,000 2,000 2,000

Copyright NH Hicks

4% Match vs. 3% PS Safe Harbor

Compensation 401(k)3%

Safe HarborER Cost

TotalOwner $270,000 $18,000 $8,100 $26,100Spouse 20,000 18,000 600 18,600EE1 50,000 2,000 1,500 1,500EE2 50,000 2,000 1,500 1,500EE3 50,000 2,000 1,500 1,500

Compensation 401(k) Match 4%ER Cost

TotalOwner $270,000 $18,000 $10,800 $28,800Spouse 20,000 18,000 800 18,800EE1 50,000 2,000 2,000 2,000EE2 50,000 2,000 2,000 2,000EE3 50,000 2,000 2,000 2,000

Copyright NH Hicks

4% Match vs. 3% PS Safe Harbor

Compensation 401(k)3%

Safe HarborProfit SharingNew Comp

ER CostTotal

Owner $270,000 $18,000 $8,100 $16,200 (6%) $42,300Spouse 20,000 18,000 600 1,200 (6%) 19,800EE1 50,000 2,000 1,500 1,500EE2 50,000 2,000 1,500 1,500EE3 50,000 2,000 1,500 1,500

Compensation 401(k) Match 4%ER Cost

TotalOwner $270,000 $18,000 $10,800 $28,800Spouse 20,000 18,000 800 18,800EE1 50,000 2,000 2,000 2,000EE2 50,000 2,000 2,000 2,000EE3 50,000 2,000 2,000 2,000

Copyright NH Hicks

4% Match vs. 3% PS Safe Harbor

Compensation 401(k)3%

Safe HarborProfit SharingNew Comp.

ER CostTotal

Owner $270,000 $18,000 $8,100 $27,900 (10.3%) $54,000Spouse 20,000 18,000 600 2,067 (10.3%) 20,667EE1 50,000 2,000 1,500 750 (1.5%) 2,250EE2 50,000 2,000 1,500 750 (1.5%) 2,250EE3 50,000 2,000 1,500 750 (1.5%) 2,250

Compensation 401(k) Match 4%ER Cost

TotalOwner $270,000 $18,000 $10,800 $28,800Spouse 20,000 18,000 800 18,800EE1 50,000 2,000 2,000 2,000EE2 50,000 2,000 2,000 2,000EE3 50,000 2,000 2,000 2,000

Copyright NH Hicks

Comp. 25% SEP

25% PS+ 401(k)

$216,000 $54,000 $54,000

Total $54,000 $54,000

SEP vs. UNI(k)

$216,000 Break Even SEP V. 401(k) with $54,000 Contribution

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Comp. 25% SEP

25% PS+ 401(k)

$100,000 $25,000 $25,000+24,000

Total $25,000 $49,000

SEP vs. UNI(k)

Copyright NH Hicks

Comp. 25% SEP

25% PS+ 401(k)

$100,000 $25,000 $25,000+24,000

$30,000Spouse

$7,500 $7,500+24,000

Total $32,500 $80,500

SEP vs. UNI(k)

Copyright NH Hicks

Comp. 25% SEP

25% PS+ 401(k)

$100,000 $25,000 $25,000+24,000

$30,000Spouse

$7,500 $7,500+24,000

Total $32,500 $80,500

SEP vs. UNI(k) vs. DB

DB

$212,000

$42,000

$254,000

Copyright NH Hicks

Plan Comparisons25% SEP

Owner 57

$100,000$25,000

Spouse 57

$30,000$7,500

Jack 30

$50,000$12,500

Jill 25

$50,000$12,500

ER ContEE ContER %

$32,500$25,000

57%

Copyright NH Hicks

Plan Comparisons25% SEP

Owner 57

$100,000$25,000

Spouse 57

$30,000$7,500

Jack 30

$50,000$12,500

Jill 25

$50,000$12,500

ER ContEE ContER %

$32,500$25,000

57%

3% Match SIMPLE

$3,000+15,500

$900+15,500

$1,500+12,500

$1,500+12,500

$34,900$3,000

92%

Copyright NH Hicks

Plan Comparisons25% SEP

Owner 57

$100,000$25,000

Spouse 57

$30,000$7,500

Jack 30

$50,000$12,500

Jill 25

$50,000$12,500

ER ContEE ContER %

$32,500$25,000

57%

3% Match SIMPLE

$18,500

$16,400

$1,500+12,500

$1,500+12,500

$34,900$3,000

92%

401(k) PS

$36,000+24,000

$12,000+24,000

$2,500+18,000

$2,500+18,000

$96,000$5,000

95%

Copyright NH Hicks

Plan Comparisons25% SEP

Owner 57

$100,000$25,000

Spouse 57

$30,000$7,500

Jack 30

$50,000$12,500

Jill 25

$50,000$12,500

ER ContEE ContER %

$32,500$25,000

57%

3% Match SIMPLE

$18,500

$16,400

$1,500+12,500

$1,500+12,500

$34,900$3,000

92%

401(k) PS

$60,000

$36,000

$2,500+18,000

$2,500+18,000

$96,000$5,000

95%

DB

$180,200

$56,180

$13,200

$8,200

$236,380$21,400

92%

Copyright NH Hicks

Plan Comparisons25% SEP

Owner 57

$100,000$25,000

Spouse 57

$30,000$7,500

Jack 30

$50,000$12,500

Jill 25

$50,000$12,500

ER ContEE ContER %

$32,500$25,000

57%

3% Match SIMPLE

$18,500

$16,400

$1,500+12,500

$1,500+12,500

$34,900$3,000

92%

401(k) PS

$60,000

$36,000

$2,500+18,000

$2,500+18,000

$96,000$5,000

95%

DB

$180,200

$56,180

$13,200

$8,200

$236,380$21,400

92%

DB Combo

$180,200+24,000

$56,180+24,000

$5,000+18,000

$5,000+18,000

$284,380$10,000

97%

Copyright NH Hicks

Design Highlights

• Eligibility – 30% class exclusion• Include Spouse• New comparability plans – older owners• 401(k) testing – safe harbors• Uni(k) vs. SEP• Defined Benefit 40-60-5 Rule• Roth 401(k)• Fee Disclosure and Offsets

Copyright NH Hicks

Need More Information

Tom Hicks(530) 521-7024 TomKHicks@nhhicks.com

Debbie Rath(530) 891-4975 drath@nhhicks.com

Samantha Nethington(530) 891-4975 snethington@nhhicks.com

www.nhhicks.com

Copyright NH Hicks

Experience Counts

NH HICKSLegal and Pension Consultants