Retirement Plan Options for Your Company
Business owners have a few options when it comes to retirement plans, including a SIMPLE IRA, SEP IRA, and a traditional 401(k). Solopreneurs, you can set up a solo 401(k), too. SIMPLE IRAs are only available to small business owners with 100 or fewer employees, but it allows you to match your employee contribution to help them build a retirement nest egg. SIMPLE IRA's are a great option if you don't have the administrative power to keep up with a 401(k), but want to provide a match.
A simplified employee pension plan, short SEP, is another type of retirement account. What makes a SEP IRA unique is that only the employer can make contributions on behalf of the employee. It also provides great flexibility for businesses with uncertain cash-flow, because the contribution amount is flexible - we're looking at you, start-ups!
Your Requirements As an Employer
Employers have to meet certain requirements to set up eligible retirement plans. For example, when you make matching contributions for your employees, you can’t discriminate, even with plans that don’t require regular employer contributions. Traditional 401(k) plans can include a vesting period, but SIMPLE IRAs have to be vested immediately. With SIMPLE IRAs, you typically contribute up to 3% of the employee’s salary in matching contributions.
Regardless of which type of retirement plan you choose, you have an ethical and legal responsibility towards the plan participants as the plan sponsor. This fiduciary duty extends to all the plan managers who make investment decisions on behalf of the plan’s participants. Our financial advisors can help you make sure you follow the legal requirements to ensure your retirement plan qualifies under the IRS eligibility rules.
How Employer Retirement Plans are a Win-Win
When you provide your employees with an employer-sponsored retirement plan, you're not just paying your employees for today, you're helping them invest in their own future. Showing your appreciation and helping them plan for tomorrow leads to lower turnover, saving you the money and time spent training new employees. Offering benefits can attract higher quality applicants and a more effective workforce. On top of all that mutual benefit, many companies find that tax breaks that are offered based on the retirement plan make this employee benefit more than worth it.