4 Retirement Plan Options
for Small Businesses
retirement plans have become a key component for retirement
They are also an increasingly important tool for attracting
and retaining the high-quality employees you need to compete
in today's competitive environment.
Besides helping employees save for the future, however,
instituting a retirement plan can provide you, as the
employer, with benefits that enable you to make the most of
your business's assets. Such benefits include:
- Tax-deferred growth on earnings within the plan
- Current tax savings on individual contributions to the plan
- Immediate tax deductions for employer contributions
- Easy to establish and maintain
- Low-cost benefit with a highly perceived value by your
Here's an overview of four retirement plans options that
can help you and your employees save:
SIMPLE: SAVINGS INCENTIVE MATCH
A SIMPLE IRA plan allows employees to contribute a percentage
of their salary each paycheck and to have their employer match
their contribution. Under SIMPLE IRA plans, employees can set
aside up to $12,500 in 2017 by payroll deduction. If the
employee is 50 or older then they may contribute an additional
$3,000. Employers can either match employee contributions
dollar for dollar - up to 3 percent of an employee's wage - or
make a fixed contribution of 2 percent of pay for all eligible
employees instead of a matching contribution.
SIMPLE IRA plans are easy to set up by filling out a short
form. Administrative costs are low and much of the paperwork
is done by the financial institution that handles the SIMPLE
IRA plan accounts. Employers may choose either to permit
employees to select the IRA to which their contributions will
be sent or to send contributions for all employees to one
financial institution. Employees are 100 percent vested in
contributions, get to decide how and where the money will be
invested, and keep their IRA accounts even when they change
SEP: SIMPLIFIED EMPLOYEE
A SEP plan allows employers to set up a type of individual
retirement account--known as a SEP IRA--for themselves and
their employees. Employers must contribute a uniform
percentage of pay for each employee. Employer contributions
are limited to whichever is less: 25 percent of an employee's
annual salary or $54,000 in 2017. SEP plans can be started by
most employers, including those that are self-employed.
SEP plans have low start-up and operating costs and can be
established using a single quarter-page form. Businesses are
not locked into making contributions every year. You can
decide how much to put into a SEP each year - offering you
some flexibility when business conditions vary.
401(k) plans have become a widely accepted savings vehicle for
small businesses and allow employees to contribute a portion
of their own incomes toward their retirement. The employee
contributions, not to exceed $18,000 in 2017, reduce a
participant's pay before income taxes, so that pre-tax dollars
are invested. If the employee is 50 or older then they may
contribute another $6,000 in 2017. Employers may offer to
match a certain percentage of the employee's contribution,
increasing participation in the plan.
While more complex, 401(k)plans offer higher contribution
limits than SIMPLE IRA plans and IRAs, allowing employees to
accumulate greater savings.
Employers also may make profit-sharing contributions to plans
that are unrelated to any amounts an employee chooses to
contribute. Profit-sharing Plans are well suited for
businesses with uncertain or fluctuating profits. In addition
to the flexibility in deciding the amounts of the
contributions, a Profit-Sharing Plan can include options such
as service requirements, vesting schedules and plan loans that
are not available under SEP plans.
Contributions may range from 0 to 25 percent of eligible
employees' compensation, to a maximum of $54,000 in 2017 per
employee. The contribution in any one year cannot exceed 25
percent of the total compensation of the employees
participating in the plan. Contributions need not be the same
percentage for all employees. Key employees may actually get
as much as 25 percent, while others may get as little as 3
percent. A plan may combine these profit-sharing contributions
with 401(k) contributions (and matching contributions).
If you have any questions about retirement plans for small
businesses, don't hesitate to call. Help is just a phone call away at
SMEED CPA Adds Financial
Services To Help Clients With
Investments & Insurance
often we here at SMEED CPA are asked about financial issues
that impact our clients investments and their portfolios.
We always offered our opinion and suggestions but in order to
help our clients actually execute the changes we suggest,
SMEED has created a Financial Services division.
SMEED Financial Services, Inc. will be able to
work with both individual and business clients on their
investment portfolios and manage assets on their behalf.
SMEED Financial will include Michael Uadiale,
ACA, CPA, CGMA; and Pablo Blanco who has
recently joined SMEED and comes with over 18 years of
financial sales and advising experience with affluent
Watch your inbox and mail boxes for more specific information
on services SMEED Financial Services, Inc will make available
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