Qualified Benefit Plans 

 

Qualified retirement plans typically cover substantially all eligible employees and have special tax advantages. These types of plans are subject to strict and somewhat complex rules in order to obtain tax advantages.

These are two broad categories of qualified retirement plans:

Defined Benefit Plan

Provides employees with a fixed and known benefit at retirement, the amount of which generally depends upon length of service and highest attained salary.  The company assumes the responsibility for making sure money will be available to fund a pension for retiring workers. Northwestern Mutual offers a unique product specifically designed to fund defined benefit plans for small businesses.

Defined Contribution Retirement Plan

Provides employees with a retirement benefit based on the value of the employee’s account at retirement. There are specific Defined Contribution Retirement Plans available including a 401(k) Plan, 403(b) and a Profit Sharing Plan. Variations of an IRA-based Defined Contribution Plan include Simplified Employee Pension Plan (SEP) and Savings Incentive Match Plan for Employees (SIMPLE).

Qualified Retirement Plans are provided by Northwestern Mutual Investment Services, LLC.

401(k) 

403(b) 

Profit Sharing 

SEP IRA 

SIMPLE IRA 

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401(k) Plans

A 401(k) plan is a qualified defined contribution program that provides an employee with a retirement plan benefit based on the value in the employee’s account at retirement.

A 401(k) plan is a suitable investment for any small to large employer (including nonprofit and for-profit businesses and Indian tribes) that wants to offer a salary reduction plan with design options.

Typical Options of a 401(k) include:

  • Flexible matching contribution amounts.
  • Variety of vesting options.
  • Numerous investment vehicle choices.
  • Multiple plan administrator choices.
  • Loan provisions. 
  • Balance transfers.

Benefits of 401(k) Retirement Plans

  • Employer and employee may contribute.
  • Employer contributions are tax-deductible.
  • Earnings on contributions grow on a tax-deferred basis.*
  • Pre-tax employee contributions reduce current taxable income.
  • Providing this valuable employee benefit can have a positive impact on employer efforts to recruit and retain quality employees.
  • Wide range of investment choices.

*Early withdrawal fees will apply if money is withdrawn prior to age 59 1/2.

403(b) Retirement Plans

A 403(b) plan is an employer-sponsored retirement plan that will accommodate both salary deferrals from the employee and contributions from the employer if the employer decides to contribute.

It may be established by any employer as defined by the Internal Revenue Code under IRC section 501(c)(3), which includes public educational organizations and certain tax-exempt organizations.

Employees of public school systems, private colleges and universities, nonprofit hospitals, nursing homes, health clinics, charitable organizations, religious organizations, symphony orchestras, museums, humane societies, and zoos that establish 403(b) retirement plans are eligible to participate.

Types of Accounts

A 403(b) account can be any one of the following types or combinations of these types:

  • An annuity contract.
  • An investment account, which is usually invested in mutual funds.
  • An income account set up specifically for church employees or ministers.

Benefits of 403(b) Plans

  • A self-funded retirement plan account.
  • Contributions to a 403(b) account are made on a tax-deductible basis.
  • Earnings on contributions are allowed to grow on a tax-deferred basis.*
  • You may be able to take a tax credit for elective deferrals made to your account.

*Early withdrawal fees will apply if money is withdrawn prior to age 59 1/2.

Profit Sharing

A Profit Sharing plan is a qualified defined contribution program that is funded by the employer and allows for discretionary annual contributions. A 401(k) feature can also be added to permit employees to partially fund the plan.

A Profit Sharing plan is a suitable investment for any size company and is ideal for an employer who wants flexibility in costs and contributions. Businesses with unpredictable cash flows may find that a profit sharing plan works well with their business.

Typical Options of a Profit Sharing Plan include:

  • Only the employer contributes to the plan (unless a 401(k) feature is added).
  • Variety of vesting options.
  • Numerous investment vehicle choices.
  • Multiple plan administrator choices.
  • Loan provisions.

Benefits of Profit Sharing Plans

  • Amount of employer contributions can change annually or at the employer’s discretion.
  • Employer contributions are tax-deductible.
  • Earnings on contributions grow on a tax-deferred basis.*
  • Investments can be directed by the employer or the employee.
  • Providing this valuable employee benefit can have a positive impact on employer efforts to recruit and retain quality employees.
  • Wide range of investment choices.

*Early withdrawal fees will apply if money is withdrawn prior to age 59 1/2.

SEP IRA Retirement Plans

SEP IRA plans, or Simplified Employee Pension IRA Plans, may be established by an owner of a family business or sole proprietorship, partnership, corporation, or non-profit organization with eligible employees.

SEP IRA Benefits to the Owner/Employer

  • Retirement Savings Plan
    Allows you to plan for your own retirement while you help your employees plan for theirs.


  • Easy to Set Up and Administer
    There are no IRS, Department of Labor, or Pension and Welfare Benefits Administration form filings. Necessary enrollment documents and assistance are provided by your registered representative.


  • Favorable Tax Treatment
    The contributions you make on behalf of your employees are fully tax deductible and are not subject to tax withholding, Social Security tax or federal unemployment tax.


  • Flexibility
    Contribution amounts are determined by you and completely discretionary. You can vary the amount from year-to-year or make no contribution at all in a given year. If your needs change, the SEP may be replaced with a different plan.

  • Quality Products
    The retirement plan savings accounts may be funded with either variable annuity or mutual fund products.

SEP IRA Benefits to Employees

  • Retirement Savings Plan
    Employers make contributions directly into an IRA that is owned by the participating employee.


  • Immediate Vesting
    Contributions are immediately 100% vested.

  • Favorable Tax Treatment
    Employer contributions are not taxable to the employee in the year received. All contributions and earnings grow on a tax-deferred basis until income is withdrawn from the plan.*

  • Investment Options
    Employees can apply their own investment strategies toward achieving their retirement goals by selecting the individual investment funds within the variable annuity or mutual fund products.

*Early withdrawal fees will apply if money is withdrawn prior to age 59 1/2.

SIMPLE IRA

A SIMPLE IRA, or Savings Incentive Match Plan for Employees IRA, may be established by small employers or self-employed individuals who:

  • have 100 or fewer employees who earned $5,000 or more during the previous calendar year, AND
  • do not currently maintain another qualified employer-sponsored plan, such as a SEP, 401(k), Profit Sharing or Pension Plan.

SIMPLE IRA Benefits to the Employer

  • Retirement Savings Plan
    Allows you to plan for your own retirement while you help your employees plan for theirs.


  • Enhanced Recruiting and Retention
    Providing this valuable employee benefit can have a positive impact on your efforts to recruit and retain quality employees.

  • Ease of Set Up
    Necessary enrollment documents and assistance are provided by your registered representative.


  • Favorable Tax Treatment
    Employer contributions are tax-deductible business expenses.


  • Contribution Options
    Contribute to employee retirement accounts on either a “matching” or “non-elective” basis … your choice.


  • Low Administrative Costs
    No fees are charged to establish the plan; only low annual maintenance charges are applied to individual accounts.

  • Quality Products
    The retirement savings accounts may be funded with either variable annuity or mutual fund products from Northwestern Mutual.

SIMPLE IRA Benefits to Employees

  • Retirement Savings Plan
    A ways and means for employees to save for retirement and receive contributions from the employer.

  • Immediate Vesting
    Contributions are immediately 100% vested.

  • Favorable tax treatment
    Employees contribute by deferring current income, thereby reducing their taxable income by the amount of their contributions to the SIMPLE IRA. All contributions and earnings grow on a tax-deferred basis until income is withdrawn from the plan.*

  • Investment Options
    Employees can apply their own investment strategies toward achieving their retirement goals by selecting the individual investment funds within the variable annuity or mutual fund products.

*Early withdrawal fees will apply if money is withdrawn prior to age 59 1/2.

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