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 When
it comes to business finances, a company retirement plan is actually
one of life's rare win-win opportunities.
Developed by the Internal Revenue Service primarily to protect and
benefit individuals, business retirement plans also reward
businesses and their owners. A retirement plan also represents one
of the few remaining tax breaks. Business retirement plans offer two
potential tax breaks; one for your employees and another for your
business. If your employees contribute to your plan, their
contributions are made through pretax payroll deductions, reducing
their taxable income and thereby their income tax. Similarly,
contributions you make on behalf of your employees are deductible as
a business expense. The result can be a significant reduction in the
tax you pay on business income. As an employee of your business, you
too can participate in your company's plan, which can be a better
way to save for retirement as compared to a personal Individual
Retirement Account. Business retirement plans provide for
contributions as high as 15 percent to 25 percent of your income,
depending on the type of plan you choose.
Have you determined which type of retirement plan best suits your
business?
Considerations
should be made for the following:
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Have you
decided whether to make contributions to the plan, and, if so,
whether to make non-elective and/or matching contributions?
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Have you
decided to hire a financial institution or retirement plan
professional to help with setting up and running the plan?
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Have you
adopted a written plan that includes the features you want to
offer, such as whether participants will direct the investment
of their accounts?
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Have you
notified eligible employees and provided them with information
to help in their decision-making?
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Have you
arranged a trust fund for the plan assets or will you set up the
plan solely with insurance contracts?
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Have you
developed a record keeping system?
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Are you
familiar with the fiduciary responsibilities?
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Are you
prepared to monitor the plans service providers
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Are you
familiar with the reporting and disclosure requirements of a
retirement plan?
You needn't be a
large company to benefit from a retirement plan. They are designed
for businesses of all sizes whether yours is a company of one or
many employees.
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