Regardless of the size of your business, small business owners have countless options for employee retirement plans they can offer as part of their benefits and compensation package. Offering retirement plans to employees is an effective way to attract, retain, and reward top talent in your industry.
Choosing the right retirement plan for your small business starts with researching all the options available to you and your employees. It’s vital that you analyze what your employees’ needs are, what retirement plan options make the most sense for them, and which plans also align with your small business’s objectives.
Many different types of small business retirement plans are available. Based on your needs, RMR can assess which options are most affordable and advantageous for you and your employees. We will also discuss the tax advantages that can offset the expense of sponsoring a small business retirement plan in many cases.
Corporate 401 (K)
Money Purchase Plans
A money purchase plan is a pension plan that has a mandatory annual contribution. The contribution formula is established in the plan document however company contributions can be as high as 25% of pay. Employers also have the option of making all contributions subject to a vesting schedule.
For businesses with a number of part-time employees or high employee turnover, or those needing the freedom of variable contributions, a Profit-sharing plan may be the perfect answer.
A 401(k) plan allows participants to contribute a portion of their pre-tax salary to a tax-deferred retirement plan. Some companies may provide a matching option to their employees as an extra incentive for the participants to contribute. All plans are subject to discrimination testing to ensure all plan participants are receiving equal benefit.
Similar to a basic Roth-IRA, Roth 401(k) contributions are made with after-tax dollars and are eligible to grow tax-free. Unlike a Roth-IRA, participants may contribute regardless of how much they earn. A Roth 401(k) must be combined with an Individual (k) or a 401(k) plan and cannot be established on its own.
A 403(b) plan is a tax-favored retirement plan for employees of school systems, nonprofit organizations, or other tax-exempt employers (know as 501(c)(3) organizations). Participants can make pre-tax contributions and some organizations even provide a matching incentive to their employees.