Choosing the right plan: employee retirement plans can offer substantial business and employee benefits.

Author:Jackson, Darnell D.
Position::HOW DO I
 
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In today's economy, a retirement plan for your employees may not feel like a priority. But establishing a company-sponsored retirement plan may be one of the smartest moves you can make. The right plan may reduce current tax obligations for your business and enable you to build personal wealth while attracting and retaining talented employees.

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While many small business owners put off establishing a retirement plan doesn't have to be complicated. You should work with your financial advisor and tax professional to establish or update a plan that provides the flexibility you want for your business, rewards employees and helps you build personal wealth.

One of the many important factors to consider when establishing an employee retirement plan is the size of your business. Each plan option has different requirements and offers varied benefits, so choose the plan that is right for you and your business. Also, keep in mind that as your business grows and evolves, you can change your retirement plan.

To help you choose the most appropriate employee retirement plan for your business, here is a brief overview of some of the most popular plans for small business owners.

SIMPLE IRA

The Savings Incentive Match Plan for Employees (SIMPLE) IRA may be a good choice as a first retirement savings plan for small businesses that want to offer employee salary deferral contributions and who have 100 or fewer employees. The SIMPLE IRA tends to be a less complex and generally more affordable way to offer retirement benefits to employees since the SIMPLE IRA is not subject to many of the administrative costs and filing requirements associated with other types of retirement plans that offer employee salary deferral contributions. Eligible employees may contribute up to $10,500 each year through convenient payroll deductions that may reduce their taxable income. Employees age 50 and older may be eligible to contribute additional "catch up" contributions of up to $2,500.

With a SIMPLE IRA, the employer is required to make annual contributions of either a non-elective two percent contribution for each eligible employee, regardless of participation, or a matching contribution of up to three percent of each participating employee's compensation. Although employer contributions are generally tax deductible, you may have concerns about ongoing financial commitments in an uncertain economic climate. If that is the case, a convenient alternative for you may be...

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