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Hiring an employee isn’t challenging but retaining one is definitely. So how can you keep your employee on board? Is there an effective solution to control your employee turnover ratio? YES! One of the most effective and excellent solutions is to offer perks in addition to salary!
And what’s better than providing your employees something for their retirement? You are guessing it right. We are talking about the employee retirement plan. Many companies and small businesses miscalculate the importance of employee retirement plans and don’t buy employee retirement plan.
In doing so, they not only lose their workforce but also leaves an adverse impact on business reputation. So if you are looking for retirement plan service providers to help you with the best retirement policy, then you are on the right web-page!
Here you will not only learn some essential facts about the employee retirement plan but also we have a quick solution for your business.
What Is The Purpose Of A Retirement Plan?
Once a company hires its employees, the employer needs to provide some benefits other than the salary. Benefits such as accommodation allowance, health insurance, or medical facility etc. help are one of the most common employee benefits. But even these benefits are not enough to retain the right employees in your company.
So to keep your highly skilled, expert employee to your company, it is imperative to show them that your company cares for its employees. It is the company’s responsibility to take care of its employees, not just during employment but also after their retirement.
Therefore, reputable companies always provide a reasonable employee retirement plan for their employees. With the help of retirement, plans the employer gains the trust of its employees and prevents unnecessary turnover.
Retirement Plan Types and How To Choose One For Your Business?
Usually, there are six different types of employee retirement benefit, including:
1. MyRA – The Federal government plan:
- Funds invested in government bonds.
- Total contribution limit up to $5,500.
- A minimum deposit of $25 per employee.
- Both employee or employer can contribute at least $5 per pay period.
- The total cumulative benefit is up to $15,000.
- An Easy and hassle-free retirement plan for employers.
2. SEP-IRA – Simplified employee pension plan:
- The total contribution would be the lower of $53,000 for the 2015 and 2016 tax years or 25% of the employee’s net compensation.
- Contributions must be made by the employer only.
- Employees can also save on their own IRA plans.
- This plan is suitable for corporations as well as sole proprietors, and partnership business.
3. SIMPLE IRA – Savings incentive match plan for employees:
- The employer has to contribute either 3% of the employee’s compensation or 2% of total compensation for each employee annually.
- The employees can also contribute up to $12,500 (optional).
- Employees are also allowed a $3,000 catch-up contribution.
- Suitable for small companies/businesses with less than 100 employees.
4. SIMPLE 401(K) – Savings incentive match plan for employees:
- The contribution rules are the same as the SIMPLE IRA plan.
- The employer can also grant loans from the plan.
- For small companies where employee’s annual salary doesn’t exceed $50,000.
5. Solo or One Participant 401(K) plan:
- Contributions are allowed up to $53,000.
- Paperwork is mandatory for companies and businesses with assets up to $250,000 or more.
- The business owner can contribute both as an employer or employee.
- This plan is suitable for partnerships, single-member companies and self-employed.
6. Defined Benefit Plan:
- No limit for the contributions.
- All investment risk is for the employer.
- Annual paperwork filing with the government is mandatory.
- The annual benefit for the employe is the lower of 100% of the participant’s average compensation for his or her highest 3 consecutive calendar years, or $210,000.
What type of plan/package would be suitable for your business/company depends on the following factors:
- Business/company size,
- The business structure,
- The total amount of business can put aside for the retirement plan; and
- How the business plan to fund it.
Benefits of Retirement Plan:
One common misperception about retirement plans is that it is only beneficial for the employees. Therefore most companies, especially the small ones, overlook the need for an employee retirement plan. But that’s not the truth!
According to the employee retirement service providers and business coaches, this employee benefit is beneficial for both parties. The biggest benefit of an employee retirement plan for the company is that the employees don’t quit easily. But it’s not the only advantage of a retirement plan.
Here is a list of some other fruitful advantages of offering a retirement benefit to your employees:
- Several significant and remarkable tax reliefs on the tax returns.
- It is a sure way to keep your business/company competitive.
- It encourages as well as motivates the employees to maximize efficiency and productivity.
- Retirement benefits come with some impressive recruiting advantages.
- With a retirement plan, it is possible to surcharge the compensation packages in case of high start-up costs or insufficient cash funds.
- The owners of the business can also save for themselves through a retirement plan.
How To Get a Retirement Plan?
The most important question regarding a retirement benefit is how to get it in the first place? Does the company have to administer it on its own? Or are there any retirement plan providers from whom the company can buy employee retirement plan?
Don’t scratch your head and stop worrying. As the companies don’t have to manage and administer it on their own anymore! Many retirement benefit service providers help the businesses to come up with the most reasonable retirement compensation package!
If you want to get the retirement package for your employee from one of the largest retirement plan providers, then you just need to answer these questions:
- The current number of full-time employees you have.
- How much benefit (in value) you want to offer to your employee via retirement benefit.
- Time frame to start and/or transfer an existing plan.
- Any other specific details or instructions that you may want to tell.
How Much Does It Cost Your Business?
One of the major reason why companies especially the smaller ones, avoid retirement compensation packages is the funds and fees associated with it. Most small company owners usually think that the company doesn’t have sufficient funds to buy employee retirement plan.
If this is the reason that has been holding you from buying a retirement plan for your employees, then you must know that it’s not a problem anymore. Even if you hire the largest retirement plan, providers to administer the retirement package for your employee, it is still manageable by your business funds.
Typically a small business must keep in mind to spend an average of $5000 to $10,000 annually on employee retirement package. However, this annual cost gets reduced to $500 to $1,000 when you plan to buy a simple retirement package. All these after-employment benefit plan expenses are covered by the company’s administrative fees.
Furthermore, if a come that has assets of less than $1 million, the annual administrative fee for this particular employee benefit falls between $800 to $1,000/year and an initial set-up cost of $500 to $3,000. In addition to yearly charges, a quarterly charge of $15 to $40 is also charged per plan participant.
On the other hand, the cost structure for a simple employee retirement plan is $20 to $50 per plan participant. While the administrative service fee is charged on hourly rate basis that is between $100 to $300.
Invest In Employee Retirement Plan Today!
So if you want to increase your employee retention, increase productivity, and keep your business competitive; fill out the above questionnaire! As soon as you would fill the form, our retirement plan service providers will help you administer the best retirement package for your employees! Hurry up, invest in the benefit plan with us and enjoy multiple tax benefits!