Benefits and Compensation

More Retirement Plan Options—Which One Is Right for Your Business?

In yesterday’s Advisor, business consultant Bridget Miller wrote about some of the options out there for employer-provided retirement plans; today, Miller provides some more retirement choices for employers to consider.

IRAs, Small Businesses, Stocks, and Profit-Sharing

  • IRA. Individual Retirement Accounts, or IRAs, are commonly associated with individuals rather than businesses. Like 401(k)s, there are regulations outlining how much can be contributed in a benefit year. There are also Roth IRA options. Despite the fact that IRAs are not typically associated with employers, we wanted to mention them here because:
    • They can be used by employees to supplement their retirement savings.
    • There are ways that employers can utilize IRAs, too, such as providing a SIMPLE IRA or a SEP IRA, which we will cover in more detail below.
    • Employers can assist employees by providing a Payroll Deduction IRA option, in which the employee sets up the IRA separately and advises the employer how much of their paycheck they would like put into it each pay period.
  • SIMPLE. As mentioned yesterday, SIMPLE stands for Savings Incentive Match Plans for Employees of Small Employers. These plans can be offered by employers with 100 or fewer employees. A SIMPLE plan can be a SIMPLE 401(k) or a SIMPLE IRA. As with most of these options, there are regulatory limits on the annual contributions. However, unlike traditional 401(k)s, SIMPLE 401(k)s and SIMPLE IRAs have the feature of immediate vesting of employer contributions. They also have fewer IRS reporting obligations, a benefit for many small employers.

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  • ESOP. ESOP stands for Employee Stock Ownership Plan. This is a stock investment plan for employees in which the primary stock is from the company itself.
  • Profit-Sharing. A profit-sharing plan is a defined contribution plan in which the employer contributes to the plan with either company stocks or with cash. These types of plans may also be referred to as stock bonus plans in some cases. The contribution amount is determined by the employer, and it can change every year. There are limits to the contribution amounts, but these limits are higher than the typical 401(k) limits. The contributions can be invested and are not taxed until they are distributed.
  • SEP. SEP stands for Simplified Employee Pension plans. An employer can set up a retirement account as an IRA on behalf of the employee and make contributions to it. Employers benefit from the fact that there are fewer reporting requirements with this type of retirement plan.

While this list is already long, it’s not exhaustive—there are several more options for smaller employers as well. Please seek qualified financial guidance if you’re trying to decide what type of plan to offer employees, and remember, these types of retirement plans are governed by the Employee Retirement Income Security Act (ERISA) regulations.

From employee onboarding all the way to when these retirement plans start paying out, HR never sleeps. You need a go-to resource, and our editors recommend the “everything-HR-in-one” website,®. As an example of what you will find, here are some policy recommendations concerning e-mail, excerpted from a sample policy on the website:

  • Privacy. The director of information services can override any individual password and, therefore, has access to all e-mail messages in order to ensure compliance with company policy. This means that employees do not have an expectation of privacy in their company e-mail or any other information stored or accessed on company computers.
  • E-mail review. All e-mail is subject to review by management. Your use of the e-mail system grants consent to the review of any of the messages to or from you in the system in printed form or in any other medium.
  • Solicitation. In line with our general policy, e-mail must not be used to solicit for outside business ventures, personal parties, social meetings, charities, membership in any organization, political causes, religious causes, or other matters not connected to the company’s business.

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