What to Do about a Retirement Plan for Your Business?Masood
01/10/2019
By Barbara Weltman,
According to the Census Bureau, ![]() Why you need a retirement plan If you don’t yet have a plan, you probably should think seriously about starting one. There are several big reasons:
How to choose the best retirement plan option As a small business, there are many retirement plans to choose from. The one best-suited to your situation depends in large part on what your company can afford. Some are funded entirely by employer contributions, some entirely by employee contributions, and some by a combination of both.
The IRS has a comparison of retirement plan options
Note: The ability of small businesses to offer retirement plans with less administrative cost and less regulatory and administrative complexity to them may soon be possible. Under a recent executive order, multiple employer plans for small businesses may be developed. More guidance on this from the IRS is expected next year. Get a tax credit for setting up a plan If you don’t yet have a plan but set one up to cover at least one employee who is not an owner or spouse (“a non-highly compensated employee”) and you don’t have more than 100 employees, then you may be eligible for a tax credit for small employer pension plan startup costs. While the name of the credit implies it’s for a pension plan, it can be used for a 401(k) or any other qualified retirement plan. The credit is 50 percent of startup costs up to a top credit of $500. The credit can be claimed for the first three years of the plan. And you can even start to claim the credit in the year prior to the start of the plan. Give notice of plan participation to employees Generally, you must give notice to employees of their eligibility to participate in a plan. The time frame for the notice and the required content depends on the type of plan offered. For example, in the case of a SIMPLE IRA, you must give each employee the following information before start of the election period (generally from November 2 through December 31 for a plan starting on the following January 1):
Final thought Business owners have many demands on their limited dollars: giving raises to employees, investing in new equipment, expanding to new locations, spending on marketing, and more. But retirement savings should become part of the budget for all businesses. SOURCE: https://www.sba.gov/blogs/what-do-about-retirement-plan-your-business Back To News |
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