Benefits Check: Retirement

The fact that retirement is at the end of the employee engagement lifecycle makes it no less important than attraction or retention. Unfortunately, for most businesses – small businesses – unpredictable revenues make it difficult to commit to matching 401k contributions each year and knowing how to best administer the plan. Currently, companies with fewer than 100 workers employ 36% of the US workforce, which equates to about 42 million people.

Offering a retirement plan within your benefits package is important to employees as they look at these plans as a key component to being able to have a life after work. Organizations looking to attract and retain the best talent find offering retirement plans imperative. An additional benefit for these plans is that they can serve as a temporary tax shelter for employees who add to their retirement plans.

In addition to employee satisfaction, there are several tax advantages for small businesses when it comes to offering retirement plans. Employer contributions are deductible from the employer’s income and (other than Roth contributions) are not taxed until distributed to the employee. Also, there is a tax credit currently available to small employers that enables them to claim a credit for part of the ordinary and necessary costs of starting a plan.

So if you decide to offer a retirement package as part of your benefit offerings, what plans are available and how do you go about selecting the best fit? It’s best to work with a qualified professional when determining what’s right for your organization, but here are some important things to consider when moving forward with introducing a retirement plan for your company.

While there are quite a few types of retirement plans out in the world, there are essentially four basic types of retirement plans small businesses can consider:

• Simplified Employee Pension Plan (SEP IRA)
• Savings Incentive Match Plan for Employees (SIMPLE IRA)
• Self-Employed 401(k) plan
• Traditional 401(k) plan (has setup costs, administration and other responsibilities).

When selecting the plan that is the best fit for your company it’s important to think about long-term solutions. Don’t just pick the plan that is easiest for you right now, but rather one that will be right for the organization in the long run. Offering a match for employees seems like a great benefit and a way to get employees to participate, but can your organization afford that match in the long run? You also need to consider how employees will contribute to the plan and if the plan will allow employees to access the money prior to retirement.

For more insights into incorporating retirement plan(s) into your benefits package, contact Willory – our consulting team can help!

ADDITIONAL RESOURCES

• IRS Topics:  https://www.irs.gov/retirement-plans/plan-sponsor/lots-of-benefits-when-you-set-up-an-employee-retirement-plan
• Employee Benefits Security Administration – DOL:  https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/publications/choosing.pdf
• Forbes article:  http://www.forbes.com/sites/stuartrobertson/2011/03/29/the-top-three-retirement-plans-for-small-business/#77ad15214c0a
• Business News Daily article:  http://www.businessnewsdaily.com/7459-small-business-retirement-plans.html