How does your small business attract and retain the best talent? Offering competitive salaries, good working conditions, opportunities for advancement or a flexible work schedule are all good ideas. Have you thought about adding a retirement plan to your benefits package?
Now more than ever before, people realize that Social Security alone is unlikely to give them the kind of retirement they dream about. According to the Bureau of Labor Statistics from the U.S. Department of Labor, in 2014 “retirement benefits were available to 50 percent of workers in small” businesses (with 100 employees or less) but only 35 percent of the eligible employees participated.
The IRS offers several tax advantaged retirement plans designed specifically for small business owners. Two of them are variations on the familiar IRA retirement account:
SEP IRA (Simplified Employee Pension Plan)
You, as the employer, make a tax-deductible contribution to SEP IRAs owned by your eligible employees. You have the flexibility to change the amount of the contribution from year to year, and you may qualify for a tax credit for part of the cost of starting the SEP plan. Just like any IRA, the assets in the SEP IRA grow tax-deferred. Your employees can take their SEP IRAs with them if they move to another employer.
SIMPLE IRA (Savings Incentive Match Plan for Employees)
You choose to either match contributions dollar for dollar up to 3 percent of the employee’s compensation or make a non-elective contribution of 2 percent. Your contribution does not vary from year to year and is mandatory. Employees also have the option of making contributions on a pre-tax basis—giving them another incentive to save. Same as any IRA, the assets grow tax-deferred. If your employees move to another employer, they can take their SIMPLE accounts with them. You may qualify for a tax credit for part of the cost of starting the SIMPLE IRA.
Accounts are Easy to Open and Administer
If you’re concerned that offering retirement savings plans to your employees will mean more paperwork to wade through, relax. The SEP and SIMPLE IRAs are designed for easy administration. And when you choose to open self-directed retirement plans with The Entrust Group, our trained professionals will be at your side throughout the process. We also provide recordkeeping and as part of the service submit any required reporting government reporting to the IRS.
Encourage and Educate Your Employees
Once you’ve put a retirement savings plan in place, here are some tips for making it even more valuable for your employees:
- Make it convenient for your employees to enroll in the plan once they become eligible (with the option to opt-out, of course).
- Choose matching contributions if you decide on a SIMPLE IRA. This is another way of showing your employees that you care about their well-being.
- Educate employees about the importance of saving, how it can improve their futures and the value of their tax-advantaged retirement savings account. The Entrust Group has a wide range of educational materials available through the Learning Center.
You and your employees look out for each other today; adding a vital employee benefit will help your employees look out for themselves during retirement. Your employees aren’t the only ones who benefit from self-directed retirement plans; you do too. You control your retirement savings, in an easy and affordable way. Take a glimpse at our report,Control Your Retirement Savings the Easy, Affordable Way: Tax-Advantaged Plans for Small Business Owners, to learn more.
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