Only 28 percent of enterprises offer retirement plans to their staff, according to the US Small Business Administration (SBA). This is because many small firms feel they cannot afford to fund these benefits. Additionally, entrepreneurs do not want to give the time and resources to manage these accounts.
Many government programs have tried to streamline retirement plans. Executives that have not yet offered retirement benefits to their staff may want to consider offering a Simplified Employee Pension (SEP) Plan, a Savings Incentive Match Plan (SIMPLE) or a profit-sharing plan. These plans are inexpensive and reasonably easy to start.
An SEP (IRA-based plan) is solely purchased by the organizations. It requires the small business owner to make contributions on behalf of all regular employees who are over age 21, and have been a part of the company for at least 3 of the previous 5 years. The members must make at least $550 annually. Essentially, the contributions must be an equal percentage of the employee's compensation for all employees. Additionally, employees must be fully vested.
Entrepreneurs are afforded the option to change the contributions put into an SEP each year. Employers are not obligated to make any contributions at all unless the plan is considered "top-heavy", which hinges on how the contributions are divided between key and non-key employees. The most that can be contributed is 25% of an employee's pay, or $51,000 (the lesser amount) for 2013. SEPs may be a good choice for businesses that have fluctuating assets.
Another option is a SIMPLE (IRA-type plan), which is offered to companies with 100 or less workers. Organizations are required to either make a matching contribution (normally 3% of a worker's pay deduction), or 2% of a worker's salary regardless of whether or not the person contributes to the plan.
Because firms are required to make contributions yearly, a SIMPLE may be the most suitable choice for businesses that are in good financial standing. Staff are allowed to defer up to $12,000 (in 2013) in a SIMPLE IRA, and those who are over 50 years of age can put in an additional $2,500 annually.
A third retirement plan option that is easy to set up is a profit-sharing plan. These plans are funded solely by the firm on a pre-tax basis, and contributions are voluntary. Under these plans, most enterprises require members to be with the company for a particular amount of time in order to be fully vested.
These plans also allow workers to take out loans against the worth of their accounts, but there are required legal stipulations. Retirement plans are similar to SEP plans, in that they each have a maximum deductible contribution of 25% of income accumulated by an employee during a tax year, up to $51,000 (for 2013).
Family businesses can benefit from providing retirement plans because they attract workers, reduce staff turnover, and they make it easier for entrepreneurs to create financial independence. For these reasons, you should talk to your team and choose a plan that fits your current position and financial needs.
Many government programs have tried to streamline retirement plans. Executives that have not yet offered retirement benefits to their staff may want to consider offering a Simplified Employee Pension (SEP) Plan, a Savings Incentive Match Plan (SIMPLE) or a profit-sharing plan. These plans are inexpensive and reasonably easy to start.
An SEP (IRA-based plan) is solely purchased by the organizations. It requires the small business owner to make contributions on behalf of all regular employees who are over age 21, and have been a part of the company for at least 3 of the previous 5 years. The members must make at least $550 annually. Essentially, the contributions must be an equal percentage of the employee's compensation for all employees. Additionally, employees must be fully vested.
Entrepreneurs are afforded the option to change the contributions put into an SEP each year. Employers are not obligated to make any contributions at all unless the plan is considered "top-heavy", which hinges on how the contributions are divided between key and non-key employees. The most that can be contributed is 25% of an employee's pay, or $51,000 (the lesser amount) for 2013. SEPs may be a good choice for businesses that have fluctuating assets.
Another option is a SIMPLE (IRA-type plan), which is offered to companies with 100 or less workers. Organizations are required to either make a matching contribution (normally 3% of a worker's pay deduction), or 2% of a worker's salary regardless of whether or not the person contributes to the plan.
Because firms are required to make contributions yearly, a SIMPLE may be the most suitable choice for businesses that are in good financial standing. Staff are allowed to defer up to $12,000 (in 2013) in a SIMPLE IRA, and those who are over 50 years of age can put in an additional $2,500 annually.
A third retirement plan option that is easy to set up is a profit-sharing plan. These plans are funded solely by the firm on a pre-tax basis, and contributions are voluntary. Under these plans, most enterprises require members to be with the company for a particular amount of time in order to be fully vested.
These plans also allow workers to take out loans against the worth of their accounts, but there are required legal stipulations. Retirement plans are similar to SEP plans, in that they each have a maximum deductible contribution of 25% of income accumulated by an employee during a tax year, up to $51,000 (for 2013).
Family businesses can benefit from providing retirement plans because they attract workers, reduce staff turnover, and they make it easier for entrepreneurs to create financial independence. For these reasons, you should talk to your team and choose a plan that fits your current position and financial needs.
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