Target Benefit Plan

The following is an example of the way contributions could be allocated under a Target Benefit Plan.

In the example, the following factors were used:

The Target Benefit is 80% of salary, payable for life beginning at age 65. It must be reduced 1/25th for each year of future participation less than 25 years to meet Safe Harbor requirements.

The Amount @ age 65 is a theoretical amount needed to provide the Target Benefit. In the example, it is assumed you need $8.50 to provide each dollar of Target Benefit.

The Contribution is an amount, payable at the end of each year until age 65, which, at 7.5% interest, will grow to the amount needed at age 65.



                        Target   Amount    Contri-   % of 
           Age  Salary  Benefit  @ age 65  bution   Salary

Owner       55  150000   48000    408000    28840   19.23%

Manager     45   75000   48000    408000     9422   12.56%

Employee 1  40   30000   24000    204000     3001   10.00%

Employee 2  30   25000   20000    170000     1102    4.41%

Employee 3  25   25000   20000    170000      748    2.99%

As can be seen, the Owner's contribution is a larger percentage of salary than the other employees.

To receive the same contribution under a non-integrated Money Purchase Plan, the total contribution would have to be more than $15,000 greater, all of which would go to the other employees.

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