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Establishing an Employer-Sponsored Retirement Plan

Establishing an Employer-Sponsored Retirement Plan

June 15, 2023

Almost all business owners know they need to offer a retirement plan as part of their comprehensive benefits package. Employees expect it, and the option of online, do-it-yourself solutions have made basic retirement plans easier to implement. But if you aren’t working with a financial advisor to actively manage your workplace retirement plan, you’re likely missing out on tax savings, in addition to missing out on customized, strategic plan design.

Choosing a Plan

The best retirement plan for your business might not be a 401(k). There are a variety of plan models, such as SIMPLE IRAs, SEP IRAs or Roth IRAs. Rather than choosing an option off the shelf and potentially overpaying, a financial advisor can dig deep into your business goals and objectives to guide you to a plan that’s right for your specific needs.

Tax Benefits

Employers can receive a significant tax benefit by offering a retirement plan through tax deductions for contributions made to the plan. By reducing your taxable income, you’re also reducing your tax liability. A financial advisor can make sure you are contributing enough to receive the greatest benefit. Additionally, employees enjoy tax benefits by not paying taxes on their investments until they withdraw the funds during retirement.

Legislative Changes

SECURE Act 2.0 introduced new changes that can benefit employers – including a tax credit for small businesses that establish a new retirement plan. It increases the credit from 50% to 100% for employers with up to 50 employees, with a cap of $5,000. It’s designed to encourage more business owners to offer retirement plans for their employees.[1]

For plan years starting after Dec. 29, 2022, employers are allowed to offer small financial incentives – like gift cards or inexpensive items – to encourage participation. SECURE Act 2.0 is also requiring automatic enrollment in most 401(k) and 401(b) plans after Jan. 1, 2024, in a bid to boost participation, and employees will have to opt-out if they choose not to participate.

Starting a retirement plan is a valuable investment for both employers and employees. With the promise of financial security for the future and tax benefits for today, it’s a good time for business owners to weigh their options and consider offering a retirement plan.

At Willis & Machnik, we provide comprehensive retirement plan services – taking care of the people who take care of your company.

We meet with our clients on a regular basis and invite them to ask us questions. When you work with us, we visit your business and meet with your employees too, so they can understand the benefits being offered and how to leverage them.

Call us to learn more about how we can support you. Because when your employees thrive, your company thrives.

[1]Bloomberg Law