Small Business Retirement Plans

    Offering a retirement plan is a great way for a small business to attract and retain employees. It helps everyone, including the owner, shelter income
    from taxes while saving up for retirement.

    Because different businesses have different needs, the tax code offers several types of small business retirement plans.

    Among the options are:

    Personal Pension Account (Tax-Free): Under this plan, the employee establishes a Personally-owned life insurance plan, which can be a
    significant addition to their client's retirement resources. The employer does not have to make any premium, payments on behalf of the client,
    unless the employer deems that Key Employee Insurance would be beneficial for the employer and employee.

    Simplified Employee Pension Plan (SEP): Under this plan, the employer establishes an IRA for each employee and contributes up to 25 percent
    of an employee’s compensation each year. There is no employee contribution. It’s simple, and it's popular with small family-owned businesses.

    Savings Incentive Match Plan for Employees (SIMPLE): Companies with fewer than 100 employees can set up SIMPLE plans. Companies
    with fewer than 100 employees can set up SIMPLE IRAs. Each employee opens an IRA account, and both employer and employee can contribute
    money to it. There is minimal paperwork and no separate administration fees. It’s an efficient way to provide a retirement plan to a large group of
    people – that is, large by small-business standards.

    Traditional 401(k): These plans allow employees to set aside a portion of their salary for retirement on a pre-tax basis. (If a company offers a Roth
    401(k) plan, then contributions may be made on an after-tax basis.) Companies offering them need to file paperwork each year to ensure a
    company’s plan complies with IRS regulations. But still, a traditional 401(k) Plan is a good option for businesses that plan to grow and want
    flexibility in how much money the employer contributes.

    Safe Harbor 401(k) Plan: A traditional 401(k) involves a lot of paperwork to ensure that it complies with IRS regulations. Under a Safe Harbor
    plan, the paperwork is minimized because it includes either a matching or an automatic employer contribution. Although it is less flexible than a
    traditional 401(k), it may be easier for a small business to operate and allows the owners to contribute regardless of how much their employees
    contribute.

    Individual 401(k) Plan: A 401(k) plan for companies that only have owner(s) and their spouses with no common law employees. An individual 401
    (k) plan may allow the owner(s) to set aside more income than other types of retirement plans.

    Defined Benefit Plan:
    The Defined Benefit Plan is appropriate for those age 45 or older who wish to make tax deductible contributions in excess of the maximum limits of
    the Solo 401k or SEP IRA. Defined Benefit Plans offer substantial tax deductible retirement contributions and significant future retirement income.
    Depending on your age and income the annual contribution to a Defined Benefit Plan can exceed $100,000.

    Defined Benefit Plans have greater administrative fees and more rigid annual funding requirements, but may be ideal for business owners who
    wish to shelter the largest percentage of their income and/or who want to make the largest retirement plan contribution permitted by IRS rules.
Small Businesses
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