Steve’s specific guest, Ken Davis, CLU, ChFC, CFP, CPA. Ken Davis is the former president of the Phoenix Chapter of the Society of CPAs and has taught continuing education for the Arizona Society of CPAs on life insurance coverage and annuities. How does IRC section 79 compare to qualified plans? Let’s initial refresh ourselves on classic 401(k) plans and Roth kind 401(k) plans and how they benefit the participants. Standard K plans (401(k) plans) give a restricted contribution and deduction up front, tax deferral, taxation upon distribution, a 10% penalty just before age 59 ½ and forced distributions at age 70 ½. Key employees and owners are far more restricted in their voluntary contributions to the plan causing fantastic frustration. The formula for essential workers to participate is roughly 2% higher than the average non-very compensated employee’s common contribution percentage. Roth K plans have no deduction up front, limited contributions, tax deferral, tax free of charge distributions following age 59 ½, a ten% penalty before age 59 ½ on earnings, and no forced distributions at age 70 ½. The exact same contribution guidelines apply for key workers and owners as K plans. Roth K plans enable cash to develop up all the way till the account holder’s death producing this far more appealing to those leaving funds to youngsters. Section 79 plans have deductions typically of 30 to 40% up front, a lot greater contribution limits, tax deferral, tax free of charge withdrawals of tax basis, tax free loans (as long as the policy remains in force …
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