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Retirement Plan Analysis For Your Small Business
If you’re the owner of a small business, you’ll doubtless already know that offering a retirement
plan is a great way of attracting and retaining employees. Not only that, but it can also help both
employee and business owner to make tax savings. The tax code as it currently stands, offers a
variety of small business retirement plans, and it’s important to consider them all carefully to
find the right one for you and your employees. Here are some of the options, but to understand
them fully, it’s best to consult with a professional retirement specialist:
Simplified Employee Pension Plan (SEP):
With no employee contribution in this simple, popular plan, the employee sets up an IRA and the
employer contributes up to 25% of the employees compensation each year. This plan is very
popular with smaller, family run businesses.
Savings Incentive Match Plan for Employees (SIMPLE):
If your business employs less than 100 workers, then you can set up a SIMPLE IRA retirement
plan. With less paperwork and no separate administration fees, this efficient plan involves each
employee opening an IRA account, and both employer and employee make contributions to it.
This plan works well for small businesses wanting to offer a retirement plan to a group of
If you plan to expand your business and want a more flexible approach to how much money you
contribute on behalf of eligible employees, then this retirement plan might be a good option for
you. Allowing employees to set aside some of their salary for retirement purposes on a pre-tax
basis, if you offer this plan to your employees, you’ll be required to file paperwork every year to
make sure that it (and subsequently, you) complies with the regulations put in place by the IRS.
Designated Roth Contributions are also an option with this plan, to enable employees to
contribute some of their salary on an after-tax basis.
Safe Harbor 401(k)
Similar to a traditional 401(k), this retirement plan reduces administration due to the fact that it
includes either a matching or an automatic employer contribution that permits employees to
contribute the highest amount into their accounts each year. While not as flexible as a traditional
401(k), some smaller businesses might find this plan simpler to operate and find it easier to
comply with IRS regulations.
If you’re running a business with no common law employees, that has only an owner and where
applicable, a spouse, then this retirement plan might be the most suitable for you. In comparison
to other types of plan, this one might enable the business owner to set aside more income.
For a more detailed and up to date description of all the retirement plans that might be
available to you as a small business owner, reach out to a trusted, professional retirement