Whether a business has one employee or 100, owners should be considering the retirement of their employees, employees can save for retirement. The frightening truth is that less than 30% of employees in a small business with fewer than 100 employees have access to a workplace retirement account, according to James B. Lockhart III, co-chairman of the Bipartisan Policy Center’s Commission on Retirement Security and Personal Savings and a former deputy commissioner of the Social Security Administration. This leaves many employees with a less than ideal retirement.
Bridging the retirement divide has been a challenge for small business owners due to impediments such as: selecting the right plan, maintaining records, handling fiduciary responsibilities, and paying high fees. The solution is found through a custodian that offers readily available retirement plans for small business owners and their employees. With Provident Trust Group’s seamless account opening process, diligent administrative services, record keeping, and excellent customer experience, we are making the process of finding a retirement solution as enjoyable as possible.
Building a retirement plan is not “one size fits all.” Each business is different and owners must find a plan that fits their specific needs. Below are brief descriptions about plan types to assist in your decision making.
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A Simplified Employee Pension Plan, or SEP IRA, is a type of employer-sponsored retirement savings plan. An employer may contribute up to 25% of each employee’s annual compensation up to the maximum contribution cap established for that tax year, provided that their salary fits the income guidelines and those contributions are deductible to the employer. This tax-deduction is subject to government guidelines and income limitations.
Contributions to a SEP IRA are tax deductible, and earnings within the account are tax-deferred until withdrawal, just like a 401(k). Only when the funds are withdrawn from the account as a distribution will there be a potential tax liability.
A Savings Incentive Match Plan for Employees, commonly referred to as a SIMPLE IRA, is a type of employer-sponsored retirement savings plan. The SIMPLE IRA is an alternative option for self-employed individuals or small business owners who have 100 employees or less.
Contributions to a SIMPLE plan have the potential to provide the plan or business owner with a tax-deduction equivalent to the amount of the contribution made into the account each year. This potential tax benefit is subject to government guidelines and income limitations.
Earnings within the account are tax-deferred until withdrawn, just like a 401(k). Only when the funds are withdrawn from the account as a distribution will there be a potential tax liability.
Unlike other small business plans, a Solo 401(k) is only for business owners (and their spouses). The business cannot have full-time employees.
Contributions made to a Solo 401(k) have the potential to provide the account owner with a tax-deduction equivalent to the amount of the contribution made into the account each year. This potential tax benefit is subject to government guidelines and income limitations.
The investment income in this type of account grows without having to be included in annual taxable income of the Solo 401(k) owner, unless the contributions and investments are held under the Roth portion of the plan.
A Qualified Investment is an investment purchased with pre-tax income. Money invested in a qualifying investment trust, annuity or plan is tax deferred. Which means, the investor does not have to pay taxes until funds are withdrawn. This allows individuals and companies to partake in alternative, tangible investments with Profit Sharing Plans, Defined Benefit Plans, 401(k) Plans and more. By allowing employees and investors to break free from the stock market, value is added to the potential of their retirement plan.
Individual accounts are established for each investor to allow individualized tracking on the investor’s alternative investments of choice.
As a trust company, Provident can custody and maintain investments on behalf of individuals or entities. Provident specializes in streamlining the alternative asset industry.
Provident’s Online Portal benefits businesses, owners, and their employees by providing the availability to monitor investments and transactions, as well as view statements, lists of holdings, and other account documents. Other features include the capability to complete electronic payments, direction of investments, transfers, and the ability to make investments by linking with participating partners.