After reviewing and evaluating our clients’ needs, Walker Benefits will assist you in selecting from its menu of employee benefit programs. Depending upon what is appropriate for your company, these plans can be adopted and implemented pursuant to several alternative methods:

• Prototype Plans. This method represents the simplest form of plan adoption, generally effective upon the simple execution of an Adoption Agreement (either a standardized or nonstandardized version depending upon the options desired). Prototype Plans do not require an application for IRS approval.

• Volume Submitter Plans. Depending upon the desired features for a retirement plan, a Volume Submitter Plan may be more appropriate. These plans allow more flexibility than Prototype Plans in allowing more permissible plan options, and, in many situations, do not require IRS approval.

• Individually Designed Plans. Whenever your desired plan features become more varied or complex, or your company currently (or previously) sponsors other retirement plans, an Individually Designed Plan may be the best alternative. They are marginally more expensive to establish, administer, and obtain IRS approval, but provide the most flexibility and control over your optional plan features.

401(k) Traditional Plans. The first option usually considered by employers is a standard 401(k) Plan. Such plans can be structured either with or without a “matching” employer contribution feature. In addition, such matching contributions can either be mandatory or discretionary, depending upon the employer’s preference. These 401(k) Traditional Plans provide an excellent opportunity for those employees who want to take some initiative towards saving for their own retirement. The main drawback of such plans is usually that many employers find them too restrictive by limiting the amount that owners and highly compensated employees (those making over $95,000) can contribute due to required actual deferral percentage (ADP) testing each year. (Such ADP testing is designed to ensure that highly compensated employees do not contribute at a significantly higher percentage than do other non-highly compensated employees.)

401(k) Safe Harbor Plans. In response to employer concerns over ADP testing, a new trend in 401(k) planning is the adoption of a “safe harbor” structure which allows the plan to avoid having to do ADP testing. Under the safe harbor method, plans can forego the ADP testing in exchange for making a 3% contribution for all participants, or a 4% graded matching contribution formula for participating employees. Another drawback to safe harbor contributions is that they are 100% vested. Nevertheless, for the right situation (such as plans which may otherwise be seriously limited by ADP testing, or plans which are top-heavy) a safe harbor plan can be very beneficial. Safe harbor plans are flexible because the employer can decide as late as 30 days before year end whether to apply the 3% safe harbor formula or perform ADP testing.

Profit Sharing Plans. Another plan feature normally paired with a 401(k) Traditional or Safe Harbor Plan is the ability for the employer to make a discretionary profit sharing contribution each year. This is a very popular type of plan due to its flexibility, since the employer has total control over when and how much to contribute. The typical allocation method is generally a pro rata calculation based upon each employee’s compensation for that plan year. (Other permissible allocation method options, discussed below, are integrated compensation formulas, age-weighted formulas, or cross-tested designs.)

Integrated Profit Sharing Plans. A variation of the standard profit sharing plan is to integrate the plan’s allocation formula based upon the social security taxable wage base (currently $94,200 for the year 2006), or some other compensation level. All employees earning less than this integration amount receive a base pro rata allocation, while those earning more than the taxable wage base are eligible to receive an additional allocation (potentially as much as 5.7% of the excess compensation). The rationale for the permissibility of this additional contribution is that such employees do not have the benefit (if you want to call it that) of the employer’s social security contribution portion on their excess compensation, so the employer is permitted to pay that amount into the plan under the integrated profit sharing formula.

Age-Weighted Plans. An age-weighted allocation formula that takes into account the participants’ respective ages and service when allocating contributions can also be added to a pension plan. This generally results in older employees receiving a higher allocation percentage since they are closer to retirement age.

New Comparability or Cross-Tested Plans. Another developing trend among pension providers is to offer what is called a “new comparability” or “cross-tested” pension plan. The allocation method under this type of plan permits employees to be divided into separate groups (generally targeting highly compensated and other key employees into one group, and then everyone else into another group). The plan then calculates separate contribution percentages for these groups subject to IRS cross-testing requirements demonstrating that the benefits for the two groups are equivalent. This type of allocation method can work extremely well whenever there are older, highly compensated employees in the targeted group as compared to the remaining employees. However, the calculations can also be very volatile depending upon the overall composition and demographics of the workforce during any given year. Therefore, careful planning must be done each year to ensure that this plan fits the employer’s needs.

Money Purchase Pension Plans. This type of plan is structured very similar to a profit sharing plan, except that the contributions which accrue at the onset of each plan year become mandatory (as opposed to the flexibility of a discretionary profit sharing contribution). Prior to 2002 some employers were limited in their pension planning due to the IRS employer deduction limitations. Most pension plans were subject to a deduction limitation of 15% of eligible wages. This limitation sometimes restricted how much an employer could contribute and did not enable them to provide the intended level of benefits. A money purchase pension plan was the exception because it was permitted to apply a 25% deduction limitation. However, effective for employer taxable years beginning in 2002, the 25% deduction limitation has been extended to other types of pension plans, which may eliminate the need for some employers to implement a money purchase pension plan.

Davis -Bacon/Prevailing Wage Plans. A Davis-Bacon Plan is either a money purchase or profit sharing plan established to satisfy part of the prevailing wage requirement for federal public works projects. The profit sharing plan design may incorporate a 401(k) feature and may provide for regular profit sharing contributions to be offset by the prevailing wage contributions.

Target Benefit Plans. A target benefit plan formula is generally designed to fund each annual contribution based upon a selected target retirement benefit, with the applicable actuarial and interest factors thereby determining the annual contribution amount. In this manner, it is somewhat similar to a defined benefit plan design (but with many other distinctions).

403(b) Tax Deferred Annuity Plans. Many nonprofit companies offer what are called 403(b) Tax Deferred Annuity Plans. These plans are similar in structure to 401(k) Traditional Plans, providing for a mixture of employee contributions with employer matching and additional contributions. However, since nonprofit companies, however, are now eligible to sponsor 401(k) Plans, and the IRS has proposed regulations that would eliminate most distinction between 401(k) and 403(b) plans, so 403(b) Plans have become somewhat less popular.

Employee Stock Ownership Plans (ESOP). Many companies, business owners, and employees can derive substantial long-term benefits from establishing an ESOP. These plans have been a favored method of transitioning ownership of a company to its employees, while giving employees a valued ownership stake in their company and providing a strong incentive to motivate employees towards profitability. Walker Benefits can advise you as to when an ESOP is right for your company.