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Small Business Plans
Just a few years ago, job seekers and employees alike were looking for creative, outside-of-the-box benefits — yoga classes, a beer fridge in the kitchen, napping pods, free lunch Fridays. But today, that’s all changed.
After the economic shutdown of 2020, job seekers and employees are becoming less interested in “nice-to-have” sorts of benefits, and more interested in benefits that offer stability, security and work-life balance. In order to hire and retain star performers in your industry, your benefits need to address those issues. One big one: your retirement plan.
According to the U.S. Chamber of Commerce, just 53 percent of businesses with fewer than 100 employees offer retirement plans, but in a tough hiring market, that’s a mistake. It can seriously hinder your chances of attracting and retaining the best people.
Many small business owners just haven’t gotten around to doing the research and selecting the plan that’s best for them and their valued employees. It’s no wonder. You’re wearing many (if not all) of the hats just keeping the lights on.
Choosing a retirement plan can be confusing, especially if your business has recently grown beyond being a solo effort into employing a handful or more people. How do you pick the right plan for you and your employees? Here’s a primer.
Two great retirement plans for small businesses are the SEP IRA and the SIMPLE IRA. They give employees the security and stability they crave, and are simple for employers to administer.
For more information, watch “Small Business Retirement Plans: Overview” below:
Let’s look at SEP and SIMPLE IRAs in more detail.
Simplified Employee Pension (SEP), is designed for self-employed individuals or small businesses with fewer than 25 employees.
The SEP allows for pre-tax contributions toward retirement without getting involved in a more complex qualified plan such as a 401(k). Other facets of the plan:
Savings Incentive Match Plan for Employees (SIMPLE) is a plan for small businesses, typically with 100 or fewer employees, that have no other retirement plans.
With a SIMPLE plan, contributions are tax deductible and compound tax-deferred until withdrawn, pending that the distribution is taken after the account holder reaches 59 1/2 years of age. Other facets of the plan:
As with any new benefit option or change in the status quo, communication and training are the keys to success.
Explain the new plan in a company-wide email
Tell your employees why you’ve decided to offer a retirement plan and lay out the particulars. Include all of the information and the particulars, including their contributions, how it all works before or after taxes, when they will be vetted, how much you’re going to contribute and anything else about the plan they need to know.
Call a company meeting
Sit down either in person or virtually with all of your employees and reiterate the information in your email, giving people time to bring up any questions they may have. Ask the financial pro who is administering your plan to be the person running this meeting. He or she will be armed with answers to all of your employees’ questions.
Explain any paperwork
Your employees will have to fill out paperwork to join the plan. Make it as easy as you can for them to sign on the dotted line, walking them through the process if necessary.
Before instituting a retirement plan, be sure to talk with a financial professional. At Equity Trust, we’re here to help with your account related questions. For more information, download our free Guide to Small Business Retirement Plans.
Can I roll over a 401(k) account into a self-directed IRA?
How does the transfer process work?
What investment options are possible with an Equity Trust account?
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