Much like the Employer Sponsored Plan, a Special Pay Plan is a type of an employer-funded, defined contribution retirement plan for full-time employees. A 403(b) or 401(a) retirement plan is designed to handle special forms of compensation in a tax-advantaged manner. These forms of compensation typically include unused sick leave, unused vacation pay, severance, or years of service, and are paid out to employees upon retirement or separation of service. These funds are contributed on a pre-tax basis and placed into a fixed or variable investment vehicle.
Our solution allows employers to permanently save 7.65% in FICA taxes on contributions with zero plan administration fees. Plus, all plan administration, compliance, and education is always handled in-house at MidAmerica and never outsourced. We take it a step further by providing employers with a dedicated account manager and 24/7 online plan access.
Employer contributions are made pre-tax. Plus, funds are invested, which means the employee’s account has the potential to increase over time. During this time, employees can self-direct their investments to meet their own retirement goals. Once employees reach the IRS age requirement, flexible distribution options become available.
The Special Pay Plan can also be used in conjunction with our Health Reimbursement Arrangement (HRA) solution. It can supplement a retiree HRA by providing access to post-retirement funds that can be used for any purpose once the retiree has reached the distribution eligibility age.