Many business owners welcome the tax benefits that come with qualified retirement plans. In addition key tax breaks, these plans also help attract and retain key employees.Favorable legislative changes to traditional qualified retirement plans over the past several years have made it easier for business owners and their employees to save more for retirement. Now, even employers with more challenging goals and objectives can find a plan to meet their needs.

Savings Incentive Match Plans (SIMPLEs)

A SIMPLE plan allows participants to contribute up to $12,000 ($14,500 for those individuals who are age 50 and older) to a SIMPLE IRA or SIMPLE 401(k) in 2013. Employer contributions, which are mandatory, can be either in the form of a 2% contribution to all eligible participants or in the form of a matching contribution that is generally100% of the first 3% of compensation. Nondiscrimination testing is not required.

While not as flexible as a regular 401(k) plan, the SIMPLE IRA requires very little formal administration and better suits smaller employers satisfied with the minimum and maximum contributions that the plan allows. The IRA plan also benefits employers with family members on the payroll at lower salaries who may not be eligible for the same benefits from other types of plans.

Safe Harbor 401(k) Plans

These plans combine the flexibility of a traditional 401(k) plan with the option to avoid the burdensome nondiscrimination tests. Those who would benefit most from this plan include business owners or other highly-compensated employees who are subject to refunds of their 401(k) contributions due to failed nondiscrimination tests, or established employers who may already be making similar contributions to a plan.

The employer must make a 3% non-elective contribution to all eligible participants or a matching contribution that may obligate the employer to contribute up to 4% of compensation. These contributions must be 100% vested, but the employer avoids nondiscrimination tests that often preclude the owners and highly-compensated employees from making the maximum 401(k) contribution, which is $17,500 in 2013, or $23,000 ($17,500 + $5,500 catch-up contribution) if age 50 and older.

The 3% contribution to all eligible employees satisfies the top-heavy minimum profit sharing contribution often required by small plans. Along with the required contributions that satisfy the nondiscrimination testing, additional matching contributions or profit sharing contributions subject to vesting may also be made.

Age-Weighted Plans

An age-based or age-weighted profit sharing plan combines the flexibility of traditional profit sharing plans with the advantages of other types of pension plans, such as defined benefit plans that skew benefits in favor of older employees. In other words, both age and compensation are used as a basis for allocating employer contributions among plan participants.

This is just a sampling of the many options available to you with qualified retirement plans. If you’re not getting everything you want out of your current retirement plan, consider whether a different type of plan would be more appropriate.