As a corporate employer, it's your responsibility to determine the maximum deductible contribution that can be made to your profit sharing/401(k) plan. The maximum deduction an employer may take for a 401(k)/profit sharing plan is 15 percent of the total compensation paid to all plan participants during the year in which the deduction is taken.

Well-intentioned as they might be, the pension simplification provisions of the Small Business Job Protection Act (SBJPA) aren't. To help 401(k) plan managers with some of the thornier issues these provisions have raised, IOMA has distilled the following clarifying points from a presentation given by Vicki Judson, employee benefits counsel at the U.S. Department of Treasury, at the recent Employers' Council on Flexible Compensation (ECFC) conference in Washington, D.C. Judson's remarks were based on IRS regulations released in April:

Simplified Employee Pensions -- known as SEPs -- represent an easy, low-cost retirement plan option for employers. Instead of establishing a separate retirement plan, in a SEP the employer makes contributions to his or her own Individual Retirement Account (IRA) and the IRAs of his or her employees, subject to certain percentages of pay and dollar limits. Employers who establish SEPs can:

- Make tax deductible contributions to their own and their employees' IRAs.

- Omit or reduce contributions in years when contributions are unaffordable.

- Avoid the administrative costs and the reporting requirements of conventional plans.

Whether a SEP is appropriate for your business will depend on factors such as revenue, firm size and the age, compensation and retirement needs of the business owner and work force. You may want to discuss other retirement plan options with a professional advisor.

Small businesses have a new vehicle to help their employees save for retirement. Called the SIMPLE plan -- Savings Incentive Match Plan for Employees of Small Employers -- it gives businesses with 100 or fewer employees an affordable way to offer retirement benefits through employee salary reductions and matching contributions (similar to those found in a 401(k) plan).

SIMPLE plans are authorized by the Small Business Job Protection Act of 1996. They offer employees of small businesses -- which comprise over 38 percent of the nation's private workforce -- a convenient and inexpensive way to save. Having a SIMPLE plan may also offer another advantage: It can provide small employers with a new incentive to attract and retain qualified employees in a competitive environment.

A SIMPLE plan is ideally suited as a start-up retirement savings plan for small employers who do not currently sponsor a retirement plan. Some advantages are:

• Eligible employees can contribute up to $6,000 each year through convenient payroll deductions.

• Employers offer matching contributions equal to employee contributions (up to 3 percent of employee wages) or fixed contributions equal to 2 percent of employee wages.

• SIMPLE plans eliminate many of the administrative costs associated with larger retirement plans.

• Model plan documents, employee notices and salary reduction agreements are available from the IRS.

This booklet highlights the basic features and requirements of SIMPLE plans that involve individual retirement accounts or annuities (SIMPLE IRAs). It does not address SIMPLE 401(k) plan arrangements.

Q. I hope to retire at the end of this year, at age 65. At that time I should have about $430,000 in the IRA at the company I work for. I would like to roll this $430,000 into some kind of fund that can be expected to earn an average of 10 percent a year, or perhaps slightly better, over the next five to ten years. This would permit me to withdraw $30,000 per year to live on and still allow me to re-invest $13,000 or perhaps a bit more as a hedge against inflation.

Is this a reasonable plan? What sort of fund would you recommend that might earn 10-11 percent?

I am under the impression that at age 70 I will be required to start withdrawing money from my IRA. Who can I write to find out what the rules are?

NEW YORK, N.Y. -- Despite improved economic times and a growing unease over the future of Social Security, nearly half of all Americans (46%) have less than $10,000 saved for their retirement, according to Miles To Go: A Status Report on Americans' Plans for Retirement, a new public opinion study released today by Public Agenda. In fact, three in ten of those closest to retirement - "pre-retirees" between the ages of 51 and 61 - as well as four in ten "baby boomers" (those between the ages of 33 and 50), say they have saved less than $10,000. And 39% of Americans are anxious about their ability to achieve their desired retirement lifestyle, up from 29% in a 1994 Public Agenda study.

When companies become employee owned (as through an ESOP), leaders often have high hopes that employees will start to think and act more like business owners. And employees imagine that they will be treated like owners. Have these visions become a reality at your company?

Question 32: What would be the proper correction in the case of a profit sharing plan that has allocated a company profit sharing contribution (say, 2% of pay) to participants who had satisfied the plan's eligibility requirements but had not yet entered the plan because the entry date was after the plan's year end? Assume this occurred for several plan years.

Answer (click here).