Table: A Retirement Plan Primer For Small Business

      SIMPLIFIED EMPLOYEE     Popular among the smallest companies. Employer
      PENSIONS (SEP)          contributes to IRA of employees with effective
                              annual contribution limit of $22,500 per em-
                              ployee. Plan vests (becomes wholly owned by
                              employee) immediately. Employee can continue to
                              make regular $2,000 IRA contribution. PROS:
                              Simple and inexpensive. CONS: Difficult to ex-
                              clude part-time employees.
      SALARY REDUCTION        An SEP with a salary-reduction feature. Employee
      (SARSEP)                deferrals of up to $9,240 may not be counted as 
                              compensation by IRS. Only available to companies
                              with no more than 25 eligible employees, and at
                              least 50% must elect to participate. PROS: Same
                              as for a SEP. CONS: Salary deferrals to highly
                              compensated employees limited by the amounts
                              deferred by low-paid workers.
      PROFIT-SHARING          A discretionary contribution formula. Effective
                              annual contribution capped at $22,500. Contrib-
                              utions limited to no more than 15% of employees'
                              compensation. Variable vesting. PROS: Very 
                              flexible plan. Loans and hardship withdrawals may
                              be permitted. CONS: Annual reporting requirements.
                              Employer can have fiduciary responsibility. Greater
                              cost to set up and administer. 
      401(k)                  A profit-sharing plan with a salary-reduction 
                              feature. An employee may defer up to $9,240 per
                              person for 1995. Employer may match employee
                              deferrals. Aggregate employer contributions lim-
                              ited to 15% of employee compensation. PROS: Same
                              as profit-sharing. CONS: Same as profit-sharing.
                              Record keeping.
      MONEY PURCHASE          A fixed-contribution formula. Employer contrib-
                              utions limited to 25% of employee compensation.
                              Flexible vesting. PROS: Attractive for employers
                              wanting to contribute more than 15% of employee
                              compensation. May be paired with profit-sharing
                              plan for maximum flexibility and contribution. 
                              CONS: Same as profit-sharing. Also, distribution
                              rules have several specific requirements.

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