Does Your Small Business Have a Retirement Plan?
By Debbie Gregory.
Small businesses generally don’t think they are able the to provide their employees with a retirement plan. Business owners are financially pulled in a multitude of different directions including wages, raises, bonuses, new equipment, new locations, marketing, hiring, training, and more. Large corporations understand that an attractive benefit package helps retain employees and saves them the costs of hiring and training a new employee. It makes a great deal of business sense to include a retirement savings plan with your other benefit offerings for your employees.
Why does My Business Need a Retirement Plan?
If you currently don’t offer retirement there are three reasons why you should:
- As the owner you may be thinking of selling your business to fund your retirement and perhaps when the time comes to sell, the value of the business may not be as much as you anticipated and funds necessary for a robust retirement.
- Contributions to employee retirement plans are tax-deductible for the business.
- One of the greatest benefits for an employee is retirement savings. They will often stay with a company longer if they are offered attractive benefits and this helps you compete against companies that want to hire your valuable employees.
How To Select A Plan?
The best way to choose the appropriate retirement plan for your company is to sit down with a specialist and go review options. There is not a one-size-fits-all plan. There are so many different types of plans available including IRA-based plans, defined contribution plans (401Ks), and pensions. Some of these plans are more expensive for the company than others so it is best to consult a professional.
Once you have decided to offer retirement benefits and you have selected the right plan with a professional financial advisor, it is time to inform your employees of their eligibility to participate in the plan. Each plan has its own specific rules for informing your employees of their eligibility (the financial institution will provide the specifics based on the plan you select).
Some of the information you generally need to provide your employees includes:
- the time frame to enroll in the plan,
- any costs or salary reduction on the employee’s part,
- how much the employer will contribute on an annual basis,
- an official description of the plan from the financial institution it will be with,
- a notice about balance transfer if the employee leaves the company or chooses to move the account to a different financial institution.
As most businesses know finding and keeping good employees is expensive and time consuming. Offering good incentives, such as a retirement savings plan, helps retain good employees which can save your company money in the long run. Plus, as a business owner you need to take care of your own retirement beyond the hope that your company will sell for enough to keep you comfortable once you choose to stop working.
