Direct Recognition VIP Retirement Plan

A forward thinking retirement plan design

The Direct Recognition Variable Investment Plan (VIP) is a qualified retirement plan¹ designed to optimize benefits, mitigate risk and minimize costs, for companies with business owners and professionals who seek high tax-deductible contributions² in excess of the defined contribution plan limits.

TYPICAL RETIREMENT PLANS FOR PROFESSIONAL FIRMS & BUSINESSES

Defined contribution plans (401(k) and profit sharing) are subject to relatively low contribution limits³. Traditional defined benefit and cash balance plans permit much higher contributions⁴, but assets must be pooled together, and the firm is responsible for underfunding due to underperforming investments. This creates a risk of unfunded benefits and uncertainty with respect to future contribution requirements.

HOW VIP WORKS

VIP leverages the best features of defined contribution and defined benefit plans.

• 401(k) profit sharing plan assets continue to be individually directed by participants

• VIP assets are pooled together and invested in accordance with the firm’s overall investment objectives

• Participants may access their 401(k) profit sharing and VIP benefits at any time online, via smart phone, tablet or telephone

• VIP participant benefits increase or decrease in direct relation to investment results, mitigating the underfunding risk associated with traditional defined benefit pension plans and cash balance plans

VIP PLAN ADVANTAGES

• Contributions are tax-deductible

• Total contributions can be as high as $300,000⁵ per person⁶

• Plan assets are exempt from creditors⁷

• Risk of the plan being underfunded is mitigated

• Plan contributions are known, consistent and reliable

• With the risk of underfunding mitigated, the plan assets can be invested to optimize returns

• Every plan is submitted to the IRS for review⁸

¹As defined under IRC Sections 401(a) and IRS Regulation 1.411(a)(13)(d)(6)
²As allowed under IRC Section 404
³In accordance with IRC Sections 402(g) and 415(c)(1)(A)
⁴In accordance with IRC Section 415(b)(1)(A)
⁵When integrated with a 401(k) profit sharing plan, and determined by age and other factors.
⁶Determined by individual participant age & other factors.
⁷IRS Code Section 401(a)(13).   
⁸The submission, made on behalf of each individual plan, is an application for a letter of favorable determination of the plan’s tax qualification.

5120.S0805.0143