Basic^TM Retirement Plan

The BASIC^TM plan is a flexible, low-cost, qualified retirement plan for employers that supports both profit-sharing and money purchase plans. It is a flexible solution that allows employers to make tax-deductible contributions for each plan participant.

WHAT ARE THE BENEFITS OF THE BASIC PLAN?

With a BASIC plan, you can:

• Work towards building retirement savings
• Enjoy investment choices and flexibility
• Allocate your investments based on your needs, objectives and risk tolerance
• Enjoy simplified recordkeeping
• Offer participant loans
• Receive asset protection from creditors

WHO CAN ESTABLISH A BASIC PLAN?

• Generally, any type of employer can establish a BASIC plan, including a sole proprietor, a partnership, an S corporation or a professional corporation.
• If you, as an employer, have ever maintained or if you currently maintain a defined contribution or defined benefit plan, you should consult your tax advisor before adopting a BASIC plan.

WHO CAN PARTICIPATE IN A BASIC PLAN?

• Employees age 21 and older who have completed two years of service. A year of service is generally any year in which an employee works 1,000 hours.
• Less restrictive eligibility requirements can be adopted.
• Any employee eligible to participate must be included in the BASIC plan.

WHAT IS THE DEADLINE FOR ESTABLISHING A BASIC PLAN?

• The plan must be established by the last day of the employer's taxable year if tax-deductible contributions will be made to the plan for that year.

HOW ARE PLAN CONTRIBUTIONS MADE?

• Annual employer contributions to profit-sharing plans are discretionary.
• Annual employer contributions to money purchase plans are mandatory.
• All plan contributions are made by the employer.
• Employee salary-deferral contributions are not permitted in BASIC plans.
• Employer contributions limited to the lesser of 25% of eligible compensation or $49,000, with a $245,000 compensation cap per employee.*
• If you are a sole proprietor or partner in an unincorporated business, compensation is based on net earnings from self employment income. See Internal Revenue Service (IRS) Publication 560 for more information.

WHAT IS THE DEADLINE FOR CONTRIBUTING TO A BASIC PLAN?

• Profit-sharing plan employer contributions must be made by the tax-filing deadline, including extensions.
• Money purchase plan contributions must be made by 8½ months after the end of the plan year to avoid a funding deficiency penalty.
• Rollovers and transfers of eligible rollover distributions generally can be made at any time.

WHAT DO YOU NEED TO KNOW ABOUT DISTRIBUTIONS?

• Plan participants are entitled to receive distributions after distributable events such as retirement, disability or death.
• Distributions taken prior to age 59½ are subject to an additional 10% early withdrawal penalty, unless certain exceptions apply.
• Required minimum distributions (RMDs) must begin, as required by the IRS, by April 1 following the end of the calendar year in which the participant reaches age 70½.
• If a participant is still an active employee upon reaching age 70½ and is not a 5% or greater owner, the participant may elect to defer taking RMDs until retirement. The participant must notify the employer/plan administrator to elect this option.
• If a distribution is made payable to the participant, the participant will receive only 80% of the payment, 20% will be withheld and paid to the IRS to be credited against federal income taxes.
• A participant may be able to roll over all or a portion of a distribution with some restrictions.
• Plan participants should consult their professional tax advisors about distributions and rollovers.

HOW ARE DISTRIBUTIONS TAKEN?

• Benefits are typically payable as a lump sum (profit-sharing plan) or a life annuity (money purchase plan).
• Annuity payments are provided through the purchase of an annuity contract from an insurance company using the assets in the account.
• A participant may elect, up to 90 days before the time payments are to begin, not to receive benefits in the usual form but to receive them in such alternative forms as:
  • —    A lump-sum payment;
  • —    Installment payments (periodic or nonperiodic);
  • —    Another annuity form payable under an annuity contract purchased from an insurance company; or
  • —    Some combination of these alternative forms.

WHAT SHOULD YOU KNOW ABOUT WITHHOLDING AND REPORTING?

• Merrill Lynch Wealth Management will perform federal and state tax withholding and make payment to the IRS of applicable federal income tax on BASIC plan distributions.
• Merrill Lynch will issue IRS Form 1099-R with respect to BASIC plan distributions.
• Employers are responsible for required annual IRS Form 5500 reporting.

WHAT TIME-SAVING SERVICES ARE AVAILABLE?

Merrill Lynch provides multiple time-saving services that allow you to focus more on your business and less on administrative tasks.

• The Merrill Lynch E-Contribs for Small Business Retirement Accounts^TM service provides an easy and convenient web-based solution for making employer contributions to retirement plan accounts at no additional charge.
• The Automated Investment Program service provides a systematic way to invest in mutual funds on a schedule based on your needs.
• Managed money solutions offer discretionary, fee-based investment services.