Waddell & Reed

Employer Contribution

Waddell & Reed offers employer contribution plans (or employer-sponsored plans) including SEP IRA, Profit Sharing and Defined Benefit plans. Learn about these plans and their benefits for employers and employees.

Manage your group's plan online through the Plan Sponsor Connect tool.

What is a Simplified Employee Pension Plan (SEP IRA)?
The SEP IRA is an alternative to more complex employer-sponsored retirement plans. It was designed for employers that want to establish and contribute to a retirement plan for employees. It is commonly used by self-employed individuals or employers who don’t offer other qualified plans.

SEP IRA At A Glance

Who May Establish
  • All business types.
  • For profit and not-for-profit organizations of any size.
Administrator Testing None.
Establishment New plans must be established by the employer's tax filing due date, plus IRS-approved filing extensions.
Employee Eligibility Options for Employers
  • 21 years old.
  • Have worked for the employer for at least three of the immediately preceding five years.
  • Have earned at least $600 (indexed for inflation) in compensation.
Excludable Employees Certain union employees or non-resident alien employees.
Employer Contributions Discretionary annually.
  • Maximum is 20 percent of adjusted net business income or 25 percent of W-2.
  • Contribution not to exceed $53,000.
Annual Custodial Fee $18

SEP IRA Benefits

Employer Benefits

  • Employer contributions to a SEP IRA Plan are tax deductible.
  • Earnings on employer contributions are not taxable to the corporation.
  • Attract and retain quality employees.
  • Improved employee morale, productivity and employer/employee relations.

Employee Benefits

  • Employer contributions are not taxed until withdrawn from the plan.
  • Earnings on plan assets are not taxed until withdrawn from the plan.

What is a Profit Sharing Plan?
A Profit Sharing Plan is an employee benefit plan established and funded by a company. The employee receives a share of company profits based on an agreed-upon formula.

Profit Sharing Plan At A Glance

Who May Establish
  • All business types.
  • For profit and not-for-profit organizations of any size.
Administrator Testing Required annually.
Establishment New plans must be established by the employer's fiscal year end.
Employer Contributions Employer discretionary annual contribution:
  • 25 percent limit.
  • 20 percent for sole proprietors and partnerships.
  • Total maximum of $53,000.
Vesting Schedules Employer contributions may be subject to a vesting schedule if elected by the employer in the Plan Adoption Agreement.
Loan Feature Yes, if employer elects on Plan Adoption Agreement.
Employee Eligibility Requirements
  • One year with 1,000 hours of service (two years is available with 100 percent immediate vesting only).
  • 21 years old.
Contributions Due Employer contributions due by the employer’s tax filing due date, plus IRS-approved filing extension.

Profit Sharing Plan Benefits

Employer Benefits

  • Employer contributions to a qualified plan are tax deductible for the business.
  • Plan earnings are tax deferred until withdrawal.
  • Attract and retain quality employees.
  • Improved employee morale, productivity and employer/employee relations.

Employee Benefits

  • Employer contributions are tax deferred until withdrawn from the plan.
  • Earnings on plan assets are tax deferred until withdrawal.

What is a Defined Benefit Plan?
A Defined Benefit plan is a qualified employer-sponsored retirement plan that pays employees a benefit at retirement based on an agreed-upon formula.

Defined Benefit Plan At A Glance

Who May Establish
  • All business types.
  • For profit and not-for-profit organizations of any size.
Administrator Testing Required annually.
Establishment New plans must be established by the employer's fiscal year end.
Contributions
  • Up to $210,000.
  • Employer contributions mandatory each plan year.
Vesting Schedules Employer contributions may be subject to a vesting schedule if elected by the employer in the Plan Adoption Agreement.
Employee Eligibility Requirements
  • One year with 1,000 hours of service.
  • 21 years old.

Defined Benefit Plan Benefits

Employer Benefits

  • Employer contributions are tax deductible for the business.
  • Contribution limits for the plan can be higher than those made to a defined contribution plan.
  • Plan earnings are tax deferred until withdrawn.
  • Attract and retain quality employees.
  • Improved employee morale, productivity and employer/employee relations.

Employee Benefits

  • Distributions may be eligible for favorable tax treatment.
  • All contributions are made by the employer.

Types of Defined Benefit Plans

  • Fixed Benefit - Retirement benefits are determined as a fixed percentage of the participant’s compensation.
  • Flat Benefit - Retirement benefits are determined as a flat-dollar amount.
  • Unit Credit Benefit- Retirement benefits are determined as a fixed percentage of pay or flat-dollar amount for each year of service.
  • Cash Balance - Retirement benefits are determined by converting a hypothetical cash balance account to an annuity.

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