I would like to open a plan, but I don’t want to contribute for my employees. Can I do this?

There are a lot of business owners out there that want to set up plans to make large contributions. But they are concerned because they have employees and they want the plan to make financial sense. Since these are qualified plans, the IRS requires non-discrimination testing.

What this means is that if your employees are eligible and qualify you’ll have to make a contribution for them. But the goal is to minimize this as much as possible. Usually, we can make this work and exclude a number of employees.

For example, we can exclude the following employees:

* Employees under the age of 21

* Employees who work less than 1,000 hours a year

* Employees hired during the current year can be excluded based on plan entry dates.

The goal is that once you exclude the employees above and calculate minimum contributions, at least 90% of the total contribution goes to the owner.

So, at the end of the day, it just depends on your employee mix. The older and the higher paid your employees are, the larger the contributions. However, if your employee mix is younger and lower paid, then you can minimize any contribution to them.