A Special Pay Plan is a type of employer-funded 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, retirement bonus, severance, or years of service, and are normally paid out to employees upon retirement or separation of service. These funds are contributed on a pre-tax basis and placed into a fixed investment vehicle.
How Envoy helps.
Our solution allows employers and employees to permanently save 7.65% in FICA taxes on contributions with zero plan administration fees. Plus, all plan administration, compliance, and customer service are always handled in-house by our trusted, long-term partner MidAmerica Administrative & Retirement Solutions, and never outsourced.
A closer look at how a Special Pay Plan works.
Employer contributions are made pre-tax, and these contributions 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 Internal Revenue Service (IRS) age requirement, flexible distribution options become available.
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