Exclusively for Employers
Finding good people to support your business can be tough. As small business owners ourselves, we know that it’s an ongoing struggle to manage headcount—making sure the right people are in place to support the business, making sure they know the business, making sure they are happy. At Curnes Financial Group, we try to create an office culture that prioritizes our clients’ needs, while providing a great place to work. We think creating a great place to work means that our employees can then, in turn, give great service.
One of our main focuses, as a firm, is on the concerns of small businesses, like yours. Choosing a retirement plan, and offering the right options for your employees, causes a lot of questions. Managing expenses, managing payroll, managing the myriad of taxes and regulations—always changing—keeps many of us up at night. These are all major, ongoing concerns. We’d like to be able to help—as financial advisors who specialize in the needs of small businesses.
What options do small business owners have when it comes to retirement plans? There are more options available to you than you might first assume. If you have a small company and want a retirement program, you may want to look into these choices.
The SIMPLE IRA. These plans are very easy to create, and they have very low administrative costs and no annual IRS reporting requirements. You set up traditional IRAs for each eligible employee; they can contribute to the IRA on a tax-deferred basis (via payroll deductions, and you can either match the contributions of plan participants or contribute a fixed percentage of all eligible employees’ pay. The employees own the money in their IRAs.1,2
The SEP. A Simplified Employee Pension plan lets you make contributions toward your retirement and your employees’ retirements. (You can even have a SEP and another kind of retirement plan at your business simultaneously.) A SEP allows business owners annual tax-deductible contributions equal to 25% of your compensation (if you have a corporation) or 20% of self-employment income (for a sole proprietor).3,4
The solo 401(k). Yes, you can have a 401(k) when you are self-employed. A business owner may establish one and include their spouse in the plan, provided the spouse is an employee of the business. A solo 401(k) throws in a profit-sharing twist on the standard 401(k). Solo 401ks may be funded by the employee (deferred compensation) and the business (a percentage of profit). As an employee of your business, you can contribute an amount up to the standard yearly 401(k) contribution limit (catch-up contributions permissible if you are 50 or older). Additionally, solo 401(k) plans allow you to make tax-deductible profit-sharing contributions equal to 25% of your compensation (corporate entity) or 20% of self-employment income (sole proprietor). It is even possible to have a solo Roth 401(k). These plans do require a TPA (third-party administrator).4,5
Profit-sharing plans. Here’s one way to compete with larger companies for prime employees. Contributions are usually deductible at both the federal and state level, with contribution limits equivalent to a SEP. Contributions aren’t mandatory. If your business has a bad year, you don’t have to make them. The assets placed within the plan grow tax-deferred. Again, annual tax-deductible contributions may be made according to the 25%/20% rule depending on your business entity.4,6
New comparability plans. Basically, this is a form of profit-sharing plan that rewards senior or key employees more than others. The classic situation for this plan is when you have a small business whose multiple owners take home similar earnings, but are of different ages. The plan must be tested to meet Internal Revenue Code nondiscrimination requirements, of course. It allows different levels of compensation to different groups within a small business.
If you are reading this, you are probably thinking about putting a plan into place or switching to a retirement program more easily administered than the one you have now? But which one should you choose – and what is the next step? Take a big step today and take advantage of all that is available in the marketplace. Give us a call we’d love to schedule some time to sit down with you and hear a bit more about what you do. Then, we can work to create a plan that helps to address your greatest concerns.