If you’re a business owner, you understand the importance of quality employees. After all, your employees are what keep your business moving forward; the oars to your rowboat. So how can you attract and retain quality workers?
One of the best ways to show your employees that they are valued is by offering benefits. Yes, vacation days are awesome and dental coverage is valuable, but arguably the best and most attractive benefit you can offer is a retirement plan. After all, just like you think about how you will fund your golden years, your employees also need to set aside enough money to support themselves during their second act.
Luckily, with the passage of the SECURE act in 2019, Congress has made it easier than ever before for small and medium sized businesses to offer employees retirement benefits. Not only has the Act made it possible for businesses to claim tax credits of up to $15,500 per year for the first three years if they implement a qualifying pension plan, but business owners who add an automatic enrollment amendment to an existing pension plan can receive a tax credit of $500 per year for the first three years after implementation, as well.
Retirement Plans: The Basics
Retirement plans are either qualified or non-qualified, both of which have their own sets of pros and cons.
To begin with, qualified plans are retirement plans where income accumulates tax-deferred, a benefit to employees because they don't have to pay taxes on the income right away. Examples include pension plans, individual retirement accounts (IRAs), and defined-contribution plans such as 401(k)s. Qualified retirement plans qualify for tax breaks, however, they must meet stringent requirements of both the Internal Revenue Code and the 1974 Employee Retirement Income Security Act (ERISA) in order to do so.
In addition to benefitting the employee, there are potential employer benefits to qualified retirement plans as well. While an employer is not required to match employee contributions to these plans, it's common practice for employers to do so. The benefit here is that any contributions made by the employer are tax deductible, allowing the employer to hold onto revenue that would otherwise be contributed to their tax expenses. At the same time, they assure their employees that they are being rewarded for their service and tenure.
Non-qualified plans on the other hand are retirement savings plans that do not adhere to ERISA guidelines and are free from restrictions related to funding, eligibility, and non-discrimination. Contributions are typically taxable to the employee and nondeductible to the employer. Still, they have their advantages, especially for higher paid executives. Some examples of non-qualified retirement plans include executive bonus plans and deferred-compensation plans.
Plan for the Future with Triada Advisors
At Triada Advisors, we know that running a business can come with complex financial and emotional challenges. Our advisors are prepared to help you discover financial solutions to the unique needs and issues you face. If you're seeking the help of professionals who have boots-on-the-ground experience in your industry, don't hesitate to get in touch with our team.