Retirement plans are a great tool for improving employee recruitment and retention.  Good choices include 401(k) Plans, Safe Harbor 401(k) Plans, and Profit Sharing Plans.  With the right mix of features, these plans can be designed to provide a great employee benefit while keeping employee funding costs to a minimum.

Plans can also be designed to maximize contributions for key employees.  Options for this objective include Safe Harbor 401(k) Plans, New Comparability Plans, and Defined Benefit Plans.

Safe Harbor 401(k) Plans.  These plans allow highly compensated employees to contribute the maximum salary deferrals ($15,000 for 2006) without the risk of corrective refunds due to the plan failing the ADP Test or ACP Test.  Safe Harbor 401(k) Plans automatically satisfy these tests.

New Comparability Plans.  New Comparability Plans are a good alternative for companies wishing to retain some discretion in funding contributions while maximizing contributions for owners or highly compensated employees (up to $49,000 during 2006).

Defined Benefit Plans.  These plans allow companies to provide employees with a stated benefit at retirement age (up to $175,000 for 2006) and require annual company contributions based on actuarial factors.  Contributions do not have a statutory limit, but are limited only by the use of sound actuarial principals and factors. Defined Benefit Plans can be a great plan design for small businesses seeking to fund more than the $49,000 maximum under defined contribution plans.