The benefits of setting up a retirement plan for your small business
401(k) retirement plans are popular for businesses and their employees because they offer flexibility, automatic payroll deductions, high contribution limits and tax benefits.
Setting up a retirement plan for your small business can have many benefits for your employees as well as your business. Providing valuable retirement benefits for your staff helps to retain top talent. Research has shown that 61% of employees indicated they would leave their current job for a similar position if it provides better retirement benefits.
Businesses that offer a 401(k) plan are eligible for significant tax breaks and deductions. Business owners and their employees receive the benefits of building savings for retirement including Roth and/or tax-deferred options. Making contributions to your employees’ 401(k) plans, whether it’s a match, profit share or other, is a business tax deduction within the deductibility limitations set by the IRS on employee accounts.
When providing 401(k) plans for employees, most employers choose to work with an ERISA 3(38) advisor, one that takes on the investment management duties for your retirement plan. The advisor takes over the fiduciary duties and the liability for these management duties.
The setup process
The process of how to set up a 401(k) plan for your small business requires due diligence, making decisions based on your findings, and then choosing the option(s) that fits the needs of both your business and employees.
If you decide to set up an employee retirement plan there are a few options that make it easy to enroll, depending on the number of employees that work for you. A SEP-IRA or SIMPLE-IRA may be the best choice if you employ less than 100 people. If you employ more than 100 people or plan to as business grows, consider sponsoring a 401(k).
Once you choose the type of 401(k) plan you want to offer, figure out the policy details including the amount your employees want to invest and how much your business will commit. Matching contributions of your employees is a great way to attract new hires.
Long term benefits
Investing in a retirement plan for your employees sends the message that you’re really invested in their future. It provides an incentive for employees to save for their retirement while, at the same time, providing your business with tax savings. It’s a prime tool for recruiting and retaining valuable staff.
Whether you want to learn more about how to set up a 401(k) plan or have questions about the one you have in place, contact GYL CPAs and Advisors and speak to a professional accountant for employee benefit plans. As a comprehensive business management firm, GYL offers clients a full menu of services to meet the needs of their growing business, including ERISA audits.