The Advantages of Different Retirement Plans
When drafting a budget for your business, it is important to remember your employee benefit plans. There are several different retirement plans that your company could host for your employees, and each of these operates differently enough to warrant serious consideration. If you are implementing a plan for the first time at your company or considering an update to the plan you offer, consider the retirement benefits each plan offers.
A simplified employee pension, or SEP, plan allows employers to set aside money for themselves and their employees. SEP plans involve a fixed percentage of an employer contribution for all employees, and employers do not face the implementation or operational costs of other types of plans. Businesses of any size can take advantage of the SEP plan, but it is difficult to customize among your employees.
SIMPLE IRA plans are only able to be provided by businesses which fall into its list of qualifications, such as a certain number of employees. SIMPLE plans have a range of employee deferral election amounts, giving them more versatility than SEP plans in how they save for retirement. Employers have to pay into these plans, but the minimum and maximum contribution amounts are often favorable for business owners.
Effectively, the SIMPLE plan is designed for small businesses to help them provide adequate benefits to their employees.
The 401(k) plan is a well-known retirement plan that a company can offer. Employees participating in this retirement package defer a percentage of their income to the retirement account, and their employer often matches the contributions they make, up to a designated amount. Employers can make non-matching contributions as well.
In 401(k) plans, the available elections that employees can make are much greater than those offered by SIMPLE plans; businesses looking to hire top talent often find these benefits to be a powerful incentive for joining their business. However, the administrative requirements for these plans are much more complex and require more attention to maintain effectively. Some people may find that this type of retirement plan is best planned for ahead of time.
Contact Us for Business Support Services
William A. McGovern, CPA offers financial planning for businesses in Manasquan, Brielle, and Sea Girt. We help companies across various industries plan for the various expenditures they may face, such as implementing or updating their employee benefit plans. To find out how we can support your enterprise’s operation, call or email our firm and schedule a consultation with us today.
Bill McGovern | 08/24/2017