Small Business Retirement Plans
Retirement Solutions for your Business
Starting a retirement savings plan can be easier than most business owners think. What’s more, there are a number of retirement programs that provide tax advantages to both employers and employees.
The attorneys in our Employee Benefits and Executive Compensation Section are experienced in all aspects of retirement plan design, development and implementation. Following are just a few things to consider in setting up a retirement plan.
Experts estimate that Americans will need at a minimum 70 percent of their preretirement income to maintain their current standard of living when they stop working. Employers often play an important role in helping employees meet that goal.
Further, retirement plans may also help you attract and retain qualified employees, while offering tax savings for your business and the employee.
As an individual you can help secure your own retirement as plans are available for the self-employed.
A retirement plan has significant tax advantages:
- Employer contributions are deductible from the employer’s income,
- Employee contributions (other than Roth contributions) are not taxed until distributed to the employee, and
- Money in the plan grows tax-free until distributed.
Retirement plans are easy to establish and offer many benefits in addition to those stated above such as:
- High contribution limits are available that allow you and your employees to set aside large amounts for retirement;
- “Catch-up" rules may be available to allow employees aged 50 and over to set aside additional contributions;
- Small employers may be eligible for tax credits that enable them to claim a credit for part of the ordinary and necessary costs of starting a SEP, SIMPLE, or certain other types of plans;
- Certain low-and moderate-income individuals (including self-employed) who make contributions to their plans (“Saver’s Credit”) may be eligible for certain tax credits;
- A Roth program can be added to a 401(k) plan to allow participants to make after-tax contributions into separate accounts, providing an additional way to save for retirement. Distributions upon death or disability or after age 59½ from Roth accounts held for 5 years, including earnings, are generally tax-free.
Contact Ken Johnson in our Employee Benefits & Executive Compensation Practice Group for more information.