For Small Businesses
Do you think you don't have enough employees to offer a retirement plan? Think again.
Even one employee deserves an opportunity to prepare for the future. And, you
can count on GAFRI to assist you every step of the way. We are committed to
meeting the needs of the small- and medium-sized business owner. You can count
on us to provide flexible, high-quality, and cost-effective solutions for your
business for years to come.
Read more about group pension plans for small businesses:
Types of Plans
There are as many types of retirement plans as there are reasons for
establishing a plan. Selecting the right one for you and your business can be
difficult. At GAFRI, our team is ready to work with you and your financial
professional to evaluate your company's retirement plan needs.
SEP IRA
Under a Simplified Employee Pension (SEP) plan, you make contributions to IRAs
established and maintained for each eligible employee on a nondiscriminatory
basis. All employers are eligible to establish this type of plan.
SIMPLE IRA
Under a Savings Incentive Match Plan for Employees (SIMPLE) IRA, eligible
employees may make deferrals to SIMPLE IRAs through salary reduction
agreements. Employer contributions are required. Only employers with no more
than 100 eligible employees and no other qualified plan may establish a SIMPLE
IRA.
401(k)
A 401(k) is a profit-sharing plan with an added cash or deferred arrangement
that permits employee deferrals through salary-reduction agreements. In
addition, a 401(k) plan may provide for employer-matching contributions. Your
employer profit-sharing contributions, if any, are subject to normal rules. All
employers except state and local government agencies are eligible to establish
a 401(k) plan.
Profit Sharing
A profit-sharing plan allows employers to make discretionary contributions.
These contributions may be, but are not required to be, based on profits. All
employers are eligible to establish this type of plan.
Defined Benefit
A defined benefit pension plan provides a participant with a specified
benefit at retirement, with employer contributions actuarially determined to
provide future benefits. All employers are eligible to establish this type of plan.
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What to Consider
There are some decisions you'll need to make to put your plan in place, and
certain things you will need to consider when choosing an appropriate
retirement plan for your business. Will you match employee contributions? How
long do employees need to be with your company to be vested in contributions
you make on their behalf? How will you administer the plan? GAFRI can assist
you with these questions and more.
Cost to Business
The cost of offering a retirement plan will depend on the type of plan you
choose. Some plans require you to contribute on behalf of an employee, and
others don't require it but have the option of discretionary employer
contributions. Employer contributions can be a great tool for attracting and
retaining qualified employees. You'll also need to consider the costs of
administering a retirement plan, such as using a third-party administrator or
the staff time it would take to administer it yourself.
Limits on Contributions
Each year the IRS sets limits for each type of plan for the amount that can be
contributed. The limits are set to increase based on inflation in the coming
years. Your independent financial professional will have the most up-to-date
information to share with you.
Tax Law
There are some tax implications for your business and for your employees. The
type of plan you choose and the kinds of contributions you make on behalf of
your employees will determine what kind of tax benefits your business could
receive. On the employee level, it is important to remember that a qualified
plan allows contributions to grow tax-deferred. That means taxes will not be
due on any of the contributions until a participant receives a distribution.
All distributions are subject to ordinary income tax, and there may be an
additional 10 percent tax penalty if taken before age 59½. GAFRI does not
provide tax advice. Consult your tax professional for full details.
Loans
Depending on the type of plan you choose, loans may be made available to
participants, allowing them to access part of what they have contributed prior
to retirement. Any time a loan is issued, the participant's contract value is
used as collateral for the loan.
Plan Document Requirements
Your retirement plan may require the creation and use of an official plan
document. Our companies can assist you in creating your plan document
to cover the type of plan you will have, how it will work, who is eligible, and
more. Whether you need an official document or not, you'll need to let your
employees know what options are available when it comes to planning for their
future.
To find out how to make the most of a retirement plan for your small business,
contact our Group Retirement Plans team at 800.789.6771, ext. 10600, or send us
an e-mail at qualifiedplans@gafri.com.
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