If you run a small business, you are probably keeping 14 to 15-hour days trying to ensure that all operations are working as intended. As a result, some of the long-term “big picture” considerations are probably placed on the back burner as you attempt to navigate some of your more immediate needs.
However, if you aren’t prioritizing your company’s retirement plan, you may find that your employees will begin leaving in droves. It’s very hard to remain competitive without the presence of a compelling retirement plan for your employees.
Luckily, with the right provider and this information from Ubiquity, setting up and maintaining a plan is a simple process.
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What are the Different Types of Small Business Retirement Plans?
In general, you’ll probably want to consider one of the three following retirement plan options for your small business:
1. SEP Plan.
SEP stands for Simplified Employee Pension Plan. This plan is a type of IRA and is solely funded by employer contributions. Employers have flexibility regarding whether or not they will make contributions in addition to the amount they choose to contribute. This plan may appeal to self-employed individuals as well as small businesses with a few employees.
2. SIMPLE IRA Plan.
Another IRA plan available to small businesses with 100 or fewer employees is the Savings Incentive Match Plan for Employees. This plan has similarities to a 401k, but it is not subject to the same rigorous testing requirements. The SIMPLE IRA plan is a good option for small businesses that have no plans to grow beyond 100 workers. However, it is not a viable option for self-employed workers. There are better options for those individuals.
3. Small Business 401k Plan.
401k plans are one of the most popular retirement options for small businesses. These plans allow employees to defer a significant amount of their salary into their retirement account, while also allowing employers to match contributions as they see fit. 401k plans are generally a good option in terms of flexibility and pay off. Further, they allow for good tax options.
One downside to 401k plans is that they are subject to yearly testing by the IRS to ensure fairness. Failing these tests results in a huge headache for business owners, as they have to pay a ton in fines and spend time filling out paperwork to correct the issue.
Which Retirement Plan Should Your Small Business Implement?
Truthfully, any one of the above options may work for your business. Depending on the nature of your industry and your company, your employees and managers could benefit from each of the plans.
Naturally, you’ll want to sit down and weigh the pros and cons of each plan to see which option will be right for you. However, if you need help determining the best option, a plan provider would be happy to discuss your needs and options in more detail.
If you have further questions or just want to get a consultation on your business’s options, contact a plan provider today!