Masonry Magazine June 2001 Page. 30
An ESOP is a program that shares the wealth by encouraging employees to purchase stock in the incorporated masonry operation. Employees may thus participate in the management of the operation.
Quite simply, an ESOP is formed, it borrows money which it uses to purchase stock in the incorporated masonry business. The plan uses future contributions by the employer to repay the borrowed money along with interest charges. Each employee owns a share of the ESOP.
The masonry contractor/employer gets an immediate infusion of cash from the sale of its stock. Employees get share of management and eventually, when ESOP loans are repaid, shares of stock in the masonry business.
Kennison
FOREST PRODUCTS, INC.
P.O. Box 115
Sulphur, LA 70664
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SIMPLIFIED EMPLOYEE
PENSION PLANS
A simplified employee pension (SEP), is a written plan that allows the masonry business to make contributions toward both employees' and the owner's retirement. Under a SEP, the masonry business shares the wealth by making contributions to an individual retirement arrangement (called a SEP-IRA), which is owned by the owner or one of the employees. The contributions to each employee's SEP-IRA cannot exceed the smaller of 15 percent of the employee's compensation or $30,000. The same limit applies to the owner's SEP-IRA.
Contributions to a SEP-IRA are deductible and generally are not taxable to the plan participants. However, the most that the masonry business can deduct for employer contributions is 15 percent of the compensation paid to them during the year.
SIMPLE RETIREMENT PLANS
Congress has also authorized the establishment of so-called "SIMPLE" retirement plans. A SIMPLE plan is a written arrangement that provides the masonry business and its employees with a simplified way to share the wealth by making contributions to provide retirement income.
Under a SIMPLE plan, employees may choose whether to make salary reduction contributions to the SIMPLE plan rather than receiving those amounts as part of their regular compensation. In addition, the masonry business will contribute matching or nonelective contributions (share the wealth) on behalf of eligible employees.
A SIMPLE plan may take the form of an individual retirement account (IRA) established for each participant in which case it is exempt like any other IRA but is not subject to the nondiscrimination and qualification rules that generally apply to other "qualified" plans. Alternatively, it may take the form of a 401(k) plan within a qualified plan.
BASIC 401(K) PLANS
The often discussed 401(k) plan is nothing more than a plan that allows an employee to contribute pretax earnings to a company pool, which is invested in stocks, bonds or money market instruments. Also known as a salary reduction plan, contributions to a 401(k) plan well as earnings on them are only taxed 30 MASONRY JUNE, 2001