Retirement Plans Small Business Leaders Can Live With

Administrators of retirement plans know how detailed and structured the plans are. It’s a reason some creative business leaders shy away from learning more about retirement plans or even considering offering their employees opportunities to participate in more plans.

Making Sense of Retirement Plans

In its February 22, 2012 “Many Small Business Owners in the Dark on Retirement Plans, Fidelity Finds” article written by Donna Mitchell, Financial Planning reported that, “Small business owners displayed very little knowledge about the structure and costs of retirement savings plans available to them, Fidelity Investments found in a survey released Wednesday.” The article continued, “About half of those who use a Self-Employed 401(k) plan did not know the maximum annual employer contribution amount allowed for that type of plan. Also, about 60% of those with SIMPLE-IRAs were not aware that employer tax filing is not required, according to Fidelity.”

Types of retirement plans available to creative business leaders and their workforce include:

401(K) Retirement Plans – Perhaps one of the more widely known retirement plans. According to the United States Department of Labor (DOL) creative business leaders can receive a tax deduction for contributions they make to employee 401(K) retirement plan accounts. Additionally, you must have a written plan document, a trust fund to manage plan assets, a record keeping system and a communication plan to inform eligible and participating employees about the plan, including changes made to the plan after it launches.

Simplified Employee Pension (SEP) Plans – Up to 25 percent of employee’s salaries can be contributed to these plans. Contributions made to the plans are tax deductible. To participate in the plans, employees must be at least 21 years old and have worked for you for at least three of the last five years. Unlike 401(K) retirement plans, administrative costs associated with SEP plans are low compared to other plans.

Simple Individual Retirement Account (IRA) Plans –As a creative business leader, both you and your employees can contribute to these retirement plans. Employees may be able to contribute up to $11,500 a year to Simple IRA plans. However, if they withdrawal money from the plans before they have had the plans for two years, they may be assessed a 25 percent penalty by the Internal Revenue Service (IRS).

In the public sector, appealing retirement plans can attract highly skilled workers. Furthermore, and in both the public and private sectors, second to payroll salaries and health insurance benefits, retirement plans are often seen as one of the greatest benefits creative business leaders can give to employees. Unlike with bank accounts workers have added incentives (e.g. larger return on investments, tax penalties for early withdrawals) for allowing their retirement accounts to grow.

If you enjoyed or benefitted from this article, share it with others by clicking the Twitter, Facebook, LinkedIn, Google Plus and Share buttons below. You bet!  We appreciate it!  

Enjoy exploring the rest of our site, reading and learning from our articles.

Get Your Copy of Spiral at https://www.ebookit.com/books/0000000841/Spiral.html

Sources:

http://www.financial-planning.com/news/fidelity-survey-small-businesses-lack-retirement-planning-education-2677480-1.html (Financial Planning: Many Small Business Owners in the Dark on Retirement Plans, Fidelity Finds)