701 East Central Avenue
we understand the struggle for bandwidth between maintaining your ongoing business and setting up employee benefit/retirement plans. The battle is between spending your time focusing on growing revenue and spending time focusing on the structure and hierarchy of your business and its benefits, but really these two issues should not be inversely related! Deciding on your business’s retirement plan and how that plan could benefit your employee base should directly help your top line, as you retain and motivate your employee base. Click below to explore plans we frequently set up:
A 401(k) is a retirement plan that allows employees to contribute a portion of their pre-tax income into a personal investment account, which can grow over time and be withdrawn during retirement. (Roth elections are after tax) Employers can choose to match a portion of their employees' contributions to incentivize participation and help their employees save more for retirement. Offering a 401(k) plan can be a valuable benefit to attract and retain employees, and may also provide tax advantages for both the employer and the employees. These plans are the most common and great for businesses with over 50 employees.
Savings Incentive Match Plan for Employees - similar to a 401k but structured for small businesses where they don’t have to undergo hefty plan administration costs of a true 401k plan (401k plans have costs for the company to start them up, maintain, and make sure they’re meeting the ERISA guidelines each year). SIMPLE plans help smaller companies save overhead and therefore help out their employees in a greater manner; although it should be noted that the contribution limits of SIMPLE plans are less than a 401k plan, meaning you can’t put as much money into the account each year.
Self - Employed Pension plan - just as the acronym describes are for self-employed individuals and/or businesses with only a handful of employees (although there is no limitation). SEP's generally begin with the owner deciding how much income they want to defer into retirement. Then the owner, under ERISA guidelines, is required to make the same percentage contribution for eligible employees. SEP’s usually have the highest contribution rates; up to 25% of compensation or $58,000 per year whichever is less.
Solo (k) plans are for business with one employee and one owner who are the same person hence the term Solo. These businesses choose a solo K over a SEP most of the time because of the way their business is incorporated, generally S corporation status. The owner/ employee can defer up to $19,500 per year into the 401k, and have the company match up to a maximum of $57,000. These plans are easily converted to 401k plans upon adding additional employees/workforce.
If the contribution limitations of SEP/401k/ SIMPLE plans don't seem like enough money to save for retirement, then this is where a deferred compensation plan can provide a solution. Deferred comp plans are non-qualified meaning they do not have to operate under ERISA guidelines. They allow key employees to defer large portions of their bonuses, income, and sometimes stock into retirement. These plans are designed to either help with a tax burden now, in the future, or just help provide a greater level of compensation to key employees motivating them to keep working (golden handcuffs).
Qualified Annuities - Annuities are investments that convert a lump some of cash into an income stream over time. Annuities in this case are written in tandem with a life insurance policy. These policies can provide a lifetime of income if the insured lives, and also provide a death benefit if they perish. The annuity grows tax-deferred in the same way a traditional IRA works.
Permanent Insurance - differs from term insurance because it accrues cash value, which is the portion of the policy that is tied to an investment account. These cash values grow over time and can eventually be used as collateral, to provide income through policy loans, or surrender for a payout. The cash value portion of permanent insurance is often used as a retirement benefit of small employers.
3rd-party financed indexed universal life insurance - these insurance plans actually enable a 3rd party (bank or lender) to fund the annual premium payment of insurance. The employee or business owner in this case would be the insured. These policies enable businesses to structure buyouts from key executives by utilizing the cash value on the policy, or award the policy to employees as an added benefit. While complex, these plans can provide huge retirement savings if utilized properly and we’d love to chat with you if you have questions.
Let us guide you in the right direction for your retirement plan. We have extensive experience in creating plans curated for businesses of all sizes and will ensure your employees are ready for their retirement.