Small Business Plans
Small Business Plans — Small business, big benefits
An Individual Retirement Account (IRA) is a straightforward way to save for retirement, shelter current income from taxes and get tax-deferral on investment earnings.
Small business owners can offer employees several types of retirement plans.
A SIMPLE IRA is a retirement plan designed for companies with 100 or fewer employees. The plans are easy and inexpensive to set up and operate. Employers are required to contribute to the plan. There are two choices for employer contributions. The first is to match employee contributions up to three percent of an employee’s annual salary. The second is to make a “non-elective” fixed contribution of two percent of an employee’s salary. Non-elective means the employer makes a two percent contribution even if employees choose not to make their own contribution.
A Simplified Employee Pension (SEP) IRA may be set up by self-employed individuals and small business owners. All contributions to a SEP are from the employer, the employee is not allowed to defer part of their salary into the SEP.
Traditional 401(k) Plan
A 401(k) plan offers lots of flexibility for employers and employees.
For all IRAs and plans listed above consult a tax advisor on the amount that can be contributed in any given tax year. Distributions from the IRAs listed above will be taxed as ordinary income. Withdrawals prior to the age 59 ½ are subject to a 10% IRS early withdrawal penalty, unless an IRS exception applies.
In addition to the employee benefits required by law, such as Social Security disability and worker’s compensation, some small employers offer various types of insurance for employees, including:
- Universal, term or whole life insurance
- Accidental death & dismemberment (AD&D)
- Personal accident
- Disability income products and management
- Health-related limited benefit coverage
It can be difficult for a small business to overcome the loss of a key person or continue operating smoothly during ownership changes. Key person coverage can provide cash to help replace profits due to the death of that employee. A business succession plan can help ensure that the business continues after the death, disability or retirement of a key contributor.
Proper planning makes the difference
With proper benefits planning, a business and its employees will have the tools to be successful today and into the future.