As a small business employer, you know that offering a good retirement plan is key to attracting the best talent. However, deciding what to offer and setting up the plan the right way can seem complex and overwhelming. You might even worry about the cost of providing such a benefit. Below we outline the perks to employers for offering retirement plans and how to go about establishing one of your own.
How Employers Benefit from Offering a Retirement Plan
To provide incentive to employers to help people save for retirement, the Internal Revenue Service (IRS) allows them to make tax-deductible contributions. Other benefits you can expect include:
- Reducing recruitment and onboarding cost of new employees by retaining current employees.
- You may be eligible for additional tax credits for starting a plan. Under the SECURE Act of 2019, which stands for Setting Every Country Up for Retirement Enhancement, President Trump increased the credit from $500 to $5,000 for employers that meet certain criteria.
- The assets you place into the retirement plan continue to grow on a tax-free basis.
- You can choose from among several flexible plan options.
Participating in a retirement plan also offers numerous benefits for your employees such as contributing to the plan on a tax-deferred basis.
Factors to Consider When Choosing a Small Business Retirement Plan
It’s important to conduct a thorough investment analysis of any plan you’re considering offering to your employees. When doing so, keep in mind that the way an investment performed in the past doesn’t necessarily mean it will perform the same way in the future. You need to look beyond past performance by benchmarking your potential plan with Dow Jones and other indexes. By taking this step, you can better choose investment options that range from conservative to aggressive. We also recommend reviewing the portfolio of your retirement plan annually to ensure it’s still the best choice for your employees.
Small Business Retirement Plan Options
Most employees and employers are familiar with the 401(k) plan since it’s one of the most popular types of retirement plans. This plan allows both you and the employee to contribute towards his or her retirement with your contribution tax-exempt and the employee’s contribution tax deferred. Your first step if you’re interested in this option is to create a written plan. You will then need to select a trust fund to place the assets from the plan, create a recordkeeping system, and inform your employees of eligibility requirements and how to sign up.
You might also consider one of the plans listed below, all of which you can learn more about at this link:
- 457 Plan
- Defined Benefit Plan
- Employee Stock Ownership
- Individual Retirement Account (IRA)
- Money Purchase Plan
- Payroll Deduction IRA
- Roth IRA
- Salary Reduction Simplified Employee Pension
- Simple IRA
- Simplified Employee Pension
We are also happy to provide you with additional information and research on any of these plans at Palmetto Payroll.
Get Help with Choosing the Right Plan
Even when you’re armed with information, making the best choice for small business retirement savings isn’t easy. We invite you to contact us to request a consultation for help with this crucial decision.