Contributions to Roth IRAs are always non-deductible, and active participation status in a QRP is not a consideration. The following income levels apply for contribution eligibility:

� Single individuals are eligible make a maximum contribution for 2007 if their AGI does not exceed $99,000 ($101,000 for 2008). Partial contributions are allowed for AGI between $99,000 and $114,000 ($101,000 - $116,000 for 2008).

� Married couples filing jointly are eligible to make a maximum contribution for 2007 if their AGI does not exceed $156,000 ($159,000 for 2008). A partial contribution may be made if AGI is between $156,000 and $166,000 ($159,000 - $169,000 for 2008).

The aggregate total of all contributions to both Traditional and Roth IRAs may not exceed $4,000 per individual for 2007 and $5,000 for 2008, or $8,000 ($10,000 for 2008) per married couple, plus catch-up contributions, if applicable.

Contributions must be made either during the calendar year for which the contribution is reported or by the tax return due date of that year, not including extensions (IRC Sec. 219(f)(3) and 408A(c)(7). The tax return deadline for the 2007 tax year is Tuesday, April 15, 2008.

Under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), certain individuals became eligible to receive a federal tax credit for retirement plan contributions in addition to the tax deduction that may apply to the contribution.

Eligibility for this credit includes anyone who is at least 18 years of age (as of the close of the taxable year), not a dependent of another taxpayer, and not a full-time student. Eligible individuals are allowed a tax credit based on a percentage of their deferral into their employer-sponsored 401K, 403(b), SIMPLE, SAR-SEP, or eligible governmental 457(b) plan. In addition, a tax credit can be claimed for contributions to Traditional or Roth IRAs. The credit may be applied for the 2007 tax-year if the IRA contribution is made by April 15, 2008.

A contribution credit is a non-refundable income tax credit for individuals with adjusted gross income (AGI) under $26,000 ($52,000 for married couples filing a joint return). Individuals who qualify may receive a tax credit of up to 50% of what they contribute to a plan, with a maximum credit of $1,000 a year. For married couples filing a joint return, the maximum credit is $2,000 per year. The following chart outlines the maximum AGI allowed and the applicable contribution credit for 2007.

It is important to note that stable value and money market funds can still be used as a temporary QDIA for the participant�s first 120 days in the plan. This is intended to simplify administration if a participant chooses to opt out of a plan that utilizes automatic enrollment.

Whether your default investment prior to December 24, 2007, was stable value or money market, plan sponsors are encouraged to use the prescribed safe harbor investments to receive ongoing fiduciary relief.

Plan administration fees. For day-to-day operations of a 401K plan, fees are charged for basic administrative services, such as plan record keeping, accounting, legal, and trustee services. Administrative services can be billed using a variety of methods. The most common billing methods are:

� Per person: Expenses are based on the number of eligible employees or actual participants in the plan.

� Average participant account balance: This method provides pricing discounts as the average participant account balance increases.

� Flat rate: Fixed charge that does not vary, regardless of the plan size.

Fees may be calculated using one or any combination of these methods. Often included in these fees may be a host of additional services, such as telephone voice response systems, access to a

The following investment fees could apply:

� Sales charges. These are transaction costs for the buying and selling of shares. Many mutual fund providers offer an NAV (sales charge waived) product at certain asset levels or certain number of participants. Also, many providers have gone to a class of shares specific to retirement plans. These share classes have no sales charges, and the Financial Advisor�s commission is built into the fund�s expense ratio.

� Management fees. Management fees are the most overlooked fees in 401K plans. They include the costs to provide the fund with portfolio management services (e.g., conducting research, maintaining the trading desk, and managing the investment portfolio according to the stated objectives and policies). Most employers may not understand the consequences of such fees to their participants because, again, they are not reported on participant statements.

� Wrap fee. Some 401K providers charge wrap fees on their 401K products. The fee, charged as a percentage of assets, helps the employer subsidize the cost of the plan by putting some or all of the cost back on the participants.

ERISA requires that all plan assets be held in trust. A trustee � either a fiduciary self-trustee or a corporate trustee � must be selected for this purpose. As the number of participants in a retirement plan grows, so does the complexity and the number of time-consuming administrative functions that must be handled.

The following is a list of duties and responsibilities associated with being a plan�s trustee:

1. Assume the fiduciary liability of a trustee, which should include in-depth knowledge of ERISA�s extensive rules and regulations. Trustees should consider purchasing fiduciary liability insurance to protect themselves.

2. Obtain a "fidelity bond" to furnish protection to the plan against loss from fraud or dishonesty. This bond is required for all ERISA plans.

3. Obtain a Taxpayer Identification Number for the trust and use this number for all business of the trust, including investment accounts, bank accounts, income tax withholding, and IRS Form 5500 filings.

So, should a plan hire a corporate trustee? This question is difficult to answer, because Third Party Administrators (TPA) often perform many of the duties that fall within the trustee�s administrative functions. However, having a corporate trustee may eliminate a potential conflict of interest that might exist if the business owner is the plan�s trustee. The corporate trustee provides an extra layer of protection between the fiduciary and plan assets, reducing potential concern that plan assets won�t be used for the exclusive benefit of plan participants and their beneficiaries.

Compare the services that your TPA provides to those listed above. You will need to evaluate whether the cost of a corporate trustee outweighs the time and effort required to perform these duties yourself. Many larger employers find that it is much more cost efficient to hire a corporate trustee than worry about issues with which they have no expertise.

Sole proprietors have many options available to them when it comes to setting up a tax-advantaged retirement plan. But most sole proprietors have probably never considered a defined benefit plan as a viable option for funding retirement.

While many large corporations are terminating their defined benefit plans in favor of employee-funded 401K plans, there has been a resurgence of defined benefit plans in the sole proprietor community. Why? Defined contribution plans limit annual contributions to a maximum of $46,000 per year, but in a defined benefit plan, the business owner sets a target retirement benefit, up to a maximum of $185,000 per year, and then contributions are calculated to provide that benefit. Calculations are based upon your current age, your planned retirement age, and the average of your three highest years of income (capped at $230,000 per year). Given the right circumstances, a defined benefit plan can often allow business owners to contribute in excess of $100,000 per year, which is deductible as a business expense.

A defined benefit plan isn�t for everyone. The best candidates for a defined benefit plan are business owners who are at least 45 years of age, earn more than $75,000, and are able to contribute a significant amount of their earned income for at least 3 years.

Another consideration is whether or not the business has employees. Employers may be required to contribute to the plan on behalf of their employees. And if your employees are nearing retirement, contributions may be significant.

The defined benefit plan�s generous contribution levels make these plans worth serious consideration for sole proprietors who were late to the retirement savings game and are looking for an opportunity to accumulate a large amount of savings in a short period of time.

The information contained in this newsletter has been carefully compiled from sources believed to be reliable, but the accuracy of the information is not guaranteed. This newsletter is distributed with the understanding that the publisher is not engaging in any legal or accounting type of work such as practicing law or CPA services.

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