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Chapter 37. Banking > Trust Services

Trust Services

One benefit offered by many large corporations is a retirement plan. Even small businesses may have retirement plans for some or all employees. Some retirement plans are offered by banks, and others can be set up through a mutual fund. The basic choices are a profit-sharing pension plan, a money-purchase pension plan, a 401k plan, a Keogh, and an individual retirement account.

Simplified Employee Pension Plan

A simplified employee pension plan can be adopted by small corporations. It usually consists of either a profit-sharing pension plan or a money-purchase pension plan or both. These plans can be set up by using fill-in-the-blank forms to determine the specifics for your business. With a simplified employee pension plan (SEP), the business contributes a percentage of the employee's annual salary into a pension account. This account is tax deferred and cannot be withdrawn by the employee until retirement age. With a profit-sharing plan, the contribution percentage is determined each year; the percentage can vary from year to year. It is not necessarily based on profits, and the business may have to contribute to the retirement fund even if there is a loss. With a moneypurchase plan, the business must make a predetermined percentage contribution each year regardless of the business performance.


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