Understanding your retirement options: Group trust vs. IRA-based plans

Are you confused or overwhelmed by retirement options for your business? Don’t worry—you’re not alone. In fact, about 30% of small business owners report they’re unaware of their retirement options. To help you grasp the ABCs of retirement, we’ll provide a broad overview of basic retirement paths to help you gain a better understanding of basic options to consider for you and your employees.

There are two basic categories of tax-qualified plans. The first category is defined benefit plans, which are usually employer-funded, like a pension. But we’re going to focus on the second category, defined contribution plans, since they are now the most commonly used type of retirement plan.

Defined contribution plans are funded by contributions from both employers and employees. There are two types, group trust and IRA-based plans. The real key difference between group trust plans and IRA-based plans is fiduciary responsibility, which is a legal duty to be responsibly prudent. Fiduciary responsibility means being entrusted to care for the assets in retirement plans on behalf of all plan participants.

  • Group trust plans have greater fiduciary responsibility and cost, but more contribution options, such as higher salary deferral.
  • IRA-based plans have less fiduciary responsibility and cost, but less contribution options, and depending on the plan, lower salary deferral.

For more information, or to register for one of our retirement events to learn more about the best option for your small business, visit our Retirement Resource Portal.



This work is supported by the Sam's Club Giving Program.

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