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Account Types

Defined Contribution Plan Account – Retired

Looking for a tax-deductible method of providing employees with a retirement plan that matches some or all of their salary? A Defined Contribution Plan Account may be an appropriate investment vehicle for you.

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Janus Henderson offers two types of defined contribution plans: Money Purchase Pension Plans and Profit Sharing Plans. These plans may have more plan elections, such as a vesting schedule and other eligibility requirements elected by the employer. If the business' retirement plan will only cover a few individuals, i.e., sole proprietor including their spouse and other family members, then a Simplified Employee Pension (SEP IRA), may be more suitable and easier to administer.

Janus Henderson is a prototype plan document provider, therefore it may not be necessary for an employer to create their own plan. However, the Janus Henderson plan documents only offer generic plan elections/provisions and thus a more complex plan may require the employer to create their own individually designed plan.

These types of plans may require additional advice from an attorney or a tax professional to ensure the plan is properly managed.

Money Purchase Pension Plan (MPPP)

The MPPP allows employers to contribute a predetermined contribution amount to a retirement savings account for the benefit of employees.

Profit Sharing Plan (PSP)

The amount contributed to a PSP may be at the employer’s discretion each year, thus an employer is not locked into a predetermined contribution amount as it would be for an MPPP. Generally, PSP contribution rates must be the same for all eligible plan participants.

Is a Defined Contribution Plan right for you?

A defined contribution plan is an employer-sponsored retirement plan that allows the employer to contribute for the benefit of their eligible employees, including themselves. Employees may not contribute to this type of plan.

Tax Features and Investments

What are the tax features? Expand

Defined contribution plans allow employers to make deductible contributions that grow tax-deferred. Generally, taxes are paid when the underlying plan employee takes withdrawals from the plan. In addition, to qualify to take a withdrawal, the employee must have a triggering event, such as an end of employment or attainment of normal retirement age as specified in the plan documents.

Any withdrawals prior to the normal retirement age may be subject to additional early withdrawal penalties. In addition, the assets may stay in the account until age 73 by 12/31/2024 or the year of retirement, whichever is longer.

How much can the employer contribute to the plan? Expand

Typically, the contribution amount is the lesser of 100% of the employee's compensation. Up to 25% of all the employees’ compensation is deductible. These plans do not accept any employee contributions, such as salary reduction or elective deferral contributions. These types of contributions are more suitable for a 401k or other similar retirement plans that Janus Henderson does not offer, but the plans could be used as the investment option for plan assets.

What is the investment minimum? Expand

There are no investment minimums.

What happens if I invest too much? Expand

Investments made to an IRA or retirement account that are above allowable limits are called excess contributions. This can also happen if you were ineligible to contribute in the first place. In either scenario, excess contributions may be subject to additional taxes or penalties.

There may be several methods to remedying an excess contribution, but it’s always best to consult a certified tax advisor to find which solution works best for your situation. Contact us to learn about your excess contribution options with Janus Henderson.

Are there any investment deadlines? Expand

To take a deduction for contributions during a current tax year, the plan must be set up by the last day of that year (December 31 for calendar-year employers). Contributions can be made up to the business’ tax filing deadline.

What are the fees for a Defined Contribution Plan account? Expand

There is no cost to open an account and no annual maintenance fees when account minimum thresholds are met. Feel free to contact a Janus Henderson Retirement Specialist at 800.525.1093 to request the 408(b)(2) disclosure for more plan details.

Withdrawals and Helpful Information

How does the employer request a withdrawal? Expand

The employer may request a plan participant withdrawal by completing our Qualified Retirement Plan Distribution Form. The form also includes a special tax notice that provides the employee with information about their options and tax consequences of taking a withdrawal.

When can the participant start taking money out of the account? Expand

Generally, the employer acts as the plan administrator and they have the ability to request withdrawals once the participant has a triggering event, such as separation of service or attainment of normal retirement age – 59½.

What other information might be helpful to know? Expand

Since a defined contribution plan is more complex than other types of retirement plans, it is highly recommended that employer works closely with their professional tax advisor. Due to the complexity of these plans, there are many plan fiduciary duties the employer must abide by to ensure the plan assets qualify for deductions and grow tax-deferred. Apart from seeking professional tax advice, IRS Publication 560 and the IRS website (irs.gov) are resources for self-employed individuals and employers.

Open a Defined Contribution Plan Account

If you are an employer wishing to provide retirement benefits to your employees, and make deductible contributions to their accounts, a Defined Contribution Plan may be an ideal investment vehicle. For more information, contact a Janus Henderson Retirement Specialist at 800.525.1093 weekdays between 9 a.m. and 6 p.m. EST.

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Investing involves risk, including the possible loss of principal and fluctuation of value.

A retirement account should be considered a long-term investment. Retirement accounts generally have expenses and account fees, which may impact the value of the account. Non-qualified withdrawals may be subject to taxes and penalties. For more detailed information about taxes, consult a tax attorney or accountant for advice.
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