As a small business owner, you may want to help your employees live comfortably after retirement. A pension plan is one option small businesses can offer, but many owners are unsure how to create a plan that meets state and federal regulations. Is it possible for small businesses to create an affordable pension plan and comply with ERISA?
ERISA stands for Employee Retirement Income Security Act and it sets the standards for pension plans. While this act doesn't require businesses to set up retirement plans for their employees, it does have minimum requirements businesses need to adhere to if they have pension plans in place.
If a company does create a pension plan for employees, the company needs to provide information regarding features of the plan, participation information, and information on benefit funding. ERISA also makes those who handle and work with the retirement funds accountable for the plan.
Different retirement plan options available include accounts where the employee and the employer contribute to an account. Each participant is responsible for a set amount, usually a percentage of the employees' wages, outlined in the plan. The funds in this plan are available when the employee retires.
Examples of retirement plans include 401Ks, IRAs, profit sharing, and stock ownership. Each plan comes with its own regulations and standards regarding account management and participation. If a small business owner is looking at setting up one of these accounts, they should contact a human resource professional or accountant regarding specific information.
One option that is appealing to small business owners is a Simplified Employee Pension (SEP) Plan. With a SEP, an employee opens an IRA, which the employer contributes a specific amount. The amount can be as much as 25% of employee's salary each year, as long as the total annual amount doesn't exceed $40K.
Some employees and employers like to create a salary reduction contribution, where a portion of the employee's salary is deposited directly into the IRA. This used to be an option for SEP. However, as of 1997, this option was eliminated. Instead, employees can open a SIMPLE IRA, where salary deduction contributions of up to $7,000 annually are acceptable.
Small business owners are able to create pension funds that are affordable and compliant with ERISA. For those who don't think a 401K or stock option is viable for them, they can offer contributions to an employee's retirement through a SEP or SIMPLE IRA. This shows employees that they are valuable assets to the company, and the business can secure the employees future without endangering the future of the company.
IRS Section 125 Premium only plans (POP), a tax-free cost saving strategy, provide employers the opportunity to render their sponsored healthcare costs affordable and accessible. Taxfreepremiums provides employers entirely web-based POP support services. With document preparation, automatic compliance updates, and free nondiscrimination testing software, Taxfreepremiums is the premier authority on all premium only plan information, documentation, and services. For more information, feel free to visit http://www.taxfreepremiums.com/
ERISA stands for Employee Retirement Income Security Act and it sets the standards for pension plans. While this act doesn't require businesses to set up retirement plans for their employees, it does have minimum requirements businesses need to adhere to if they have pension plans in place.
If a company does create a pension plan for employees, the company needs to provide information regarding features of the plan, participation information, and information on benefit funding. ERISA also makes those who handle and work with the retirement funds accountable for the plan.
Different retirement plan options available include accounts where the employee and the employer contribute to an account. Each participant is responsible for a set amount, usually a percentage of the employees' wages, outlined in the plan. The funds in this plan are available when the employee retires.
Examples of retirement plans include 401Ks, IRAs, profit sharing, and stock ownership. Each plan comes with its own regulations and standards regarding account management and participation. If a small business owner is looking at setting up one of these accounts, they should contact a human resource professional or accountant regarding specific information.
One option that is appealing to small business owners is a Simplified Employee Pension (SEP) Plan. With a SEP, an employee opens an IRA, which the employer contributes a specific amount. The amount can be as much as 25% of employee's salary each year, as long as the total annual amount doesn't exceed $40K.
Some employees and employers like to create a salary reduction contribution, where a portion of the employee's salary is deposited directly into the IRA. This used to be an option for SEP. However, as of 1997, this option was eliminated. Instead, employees can open a SIMPLE IRA, where salary deduction contributions of up to $7,000 annually are acceptable.
Small business owners are able to create pension funds that are affordable and compliant with ERISA. For those who don't think a 401K or stock option is viable for them, they can offer contributions to an employee's retirement through a SEP or SIMPLE IRA. This shows employees that they are valuable assets to the company, and the business can secure the employees future without endangering the future of the company.
IRS Section 125 Premium only plans (POP), a tax-free cost saving strategy, provide employers the opportunity to render their sponsored healthcare costs affordable and accessible. Taxfreepremiums provides employers entirely web-based POP support services. With document preparation, automatic compliance updates, and free nondiscrimination testing software, Taxfreepremiums is the premier authority on all premium only plan information, documentation, and services. For more information, feel free to visit http://www.taxfreepremiums.com/
