A Multiple Employer Plan levels the playing field between small and medium-sized businesses and large corporations, and allows for equality in retirement savings solutions for their employees. The main benefits of an MEP come from harnessing the power of many. With multiple employer plans, the employers benefit from pooled plan provider resources – leading to shared costs and reduced fiduciary liability, providing economical access to superior fund lineups while minimizing fiduciary and administrative burden.
MEPs also help smaller employers attract and retain top talent they may otherwise lose to an employer who can offer a more competitive benefits package.
A standalone Single Employer Plan (SEP) is a traditional 401(k) plan adopted by one employer. While standalone plans are a great retirement savings plan option for many companies due to their customization and flexibility, they can sometimes be more costly and time consuming, depending on many factors that are at the employer’s discretion.
SEPs typically work well with larger employers or employers who have a need for complex plan designs that allow different benefit structures for different groups of employees, or employers who have formally merged plans with protected benefits. Single Employer Plans offer businesses maximum flexibility for businesses with more complex needs.
A Pooled Employer Plan (PEP) is a 401(k) solution where many different companies—ranging from small businesses to larger entities—participate in a master plan, while still maintaining plan customization offering a tailored retirement strategy at the adopting employer level. There is no need to have a common “nexus” as there is in a Multiple Employer Plan (MEP), which broadens the scope for any participating employer.
The PEP approach not only fosters a community of financial security but also reduces the administrative burden, making it a valuable retirement planning vehicle for businesses of all sizes.
IRAs are accounts held by a financial institution that an individual can use to save money for retirement – by investing in things like stocks, bonds, and real estate property. These tax-deferred accounts come in different varieties such as: Traditional IRA, Roth IRA, Rollover IRA, and more.
Traditional IRAs allow you to make pre-tax contributions up to the annual limit determined by the Internal Revenue Service (IRS). The contributions made into the account may be fully or partially deductible on a tax return, depending on factors such as annual income and filing status. With this account, the owner won’t pay income taxes until the funds are withdrawn.
Similar in structure, a Roth IRA offers tax benefits for account owners. Because investments are taxed up-front, the account grows tax-free until the owner is ready to withdraw them in retirement.
Because many IRAs and 401(k) plans have similar structures, there are some pros and cons for each that you should note to help you make the right financial decision.
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