Small business owners have a lot on their plates at all times. For instance, small business owners need to manage the company itself, keep their employees happy, and try to remain competitive in a time when there is little margin for error.
One of the biggest issues facing small business owners today is the problem of attracting and retaining quality employees. Many workers will change jobs, looking for greener pastures, multiple times in a very short time frame.
While there are a variety of different ways in which employers can decrease the chances that workers will leave their company, offering a great retirement plan is one of the best. Employees that invest in a retirement plan have an incentive to stay with a company for many years in order to allow their plans to mature.
In this article, we will review some of the best retirement plan options for small businesses.
Different Types of Small Business Retirement Plans
It may seem like only large companies, with tons of resources from which they can pull, would be able to offer compelling retirement plans to their employees. However, with the right plan, even very small operations can provide great retirement incentives to their employees without breaking the bank.
Simplified Employee Pension (SEP) Plan
The SEP plan is a type of individualized retirement account (IRA) that is maintained solely by employer contributions. This type of plan works well for both self-employed workers and those who manage multiple employees.
Savings Incentive Match Plan for Employees (SIMPLE) IRA Plan
SIMPLE IRAs are plans that have relatively low contribution ceilings, but require almost no extra effort from the employer to set up or maintain. Furthermore, these plans are not subject to the annual IRS compliance tests that are implemented for 401k retirement plans, discussed in the next section.
Many small businesses will find that the 401k plan is the best choice for their company. 401ks allow for huge contribution limits, flexible tax options (Roth or Traditional setups), and the ability to take out loans when needed.
Which Plan is Best for Your Business?
Because every business has unique needs that differ from all others, it’s difficult to provide a general recommendation on which retirement plan is best. Each plan comes with its own benefits as well as its share of downsides.
For instance, the SIMPLE IRA plan can only be used by companies who employ fewer than 100 employees. Once the company grows beyond this size, they are no longer eligible for this type of plan. On the other hand, the SIMPLE IRA is an extremely easy plan for business owners and employees to start and manage.
According to plan provider Ubiquity, whether you’re deciding on a 401k, SEP plan, or SIMPLE IRA for your business, the results are inconsequential. What matters most is that you select a plan that will help your employees and will benefit you as an employer.
If you have questions or are ready to setup a retirement plan for your company, call a plan provider today!