Small Business Retirement Plan Options
The owner is responsible for the administrative, compliance and reporting duties related to the plan.
Withdrawals of designated Roth contributions are tax-free provided they are considered a qualified distribution where the account is held for at least five years and in the event of a participant's attainment of age 59½, death or disability.
Only employers are allowed to make contributions, which can reduce taxes as a business expense.
Those contributions go to a traditional IRA held in the employee’s name, and contributions can be as much as 25% of an employee’s income (or up to ,000, whichever is less).
Plus, you’ll be helping your employees save for their retirement—a benefit that many sought-after workers will appreciate.
As a result of the 2006 Pension Protection Act, for plan years after 2006, one-participant plans with total plan assets of 0,000 or less are exempt from filing Form 5500-EZ.Your small business—or anyone with freelance income—can open a SEP IRA.They’re easy and have high contribution limits, and it can be used as a competitive recruiting advantage.Let’s take a closer look at two small business retirement plan options that may benefit you and your employees—and how they compare to a traditional 401(k).SEP IRAs are easy retirement plans to set up, and are best suited for people who are self-employed or small businesses with only a handful of employees.SIMPLE IRAs have similar benefits to a SEP IRA, with one key difference: Employees can contribute to them.This makes it appealing to employees looking to contribute their own money, and business owners who don’t want to hire someone to run the plan or spend a lot of time dealing with government non-discrimination testing or plan design.Businesses with SIMPLE IRAs do not have vesting schedules for their employees, and aren’t required to report taxes at the plan level—but they are required to make employee contributions.If you’re looking for an easy-to-run, relatively low-maintenance retirement plan that allows your employees to contribute to their retirement, a SIMPLE IRA might be right for you—particularly if you have a loyal employee base with low turnover.It's a payroll deduction plan that permits an employee to make pretax salary deferral contributions in addition to the employer's contribution. per account is drafted automatically unless otherwise instructed.