How to Pick a Workplace Retirement Plan for Your Employees

A strong retirement benefit plan can help you recruit employees and reduce turnover. Every employee wants to work for their future. A strong plan helps them feel comfortable with their current career and sets them up comfortably for the future. The various types of workplace retirement plans you can offer employees include SEP-IRA, 401(k), and PSPs. 

SEP-IRA 

A SEP-IRA is a retirement account that offers tax breaks for business owners and self-employed individuals who put money away for the future. Like a traditional IRA, SEP-IRA are contributions to a retirement account that are tax-deductible. When taken out at retirement, the distributions are taxed as income. SEP-IRAs are best for self-employed or small-business owners. With this type of retirement, you must match the compensation you give yourself to the contribution you make to your employee’s plan. Equal contributions as a percentage of compensation is why SEP-IRA is best for small-businesses with few employees. 

401(k) 

A 401(k) plan is the most common type of employer-sponsored retirement savings program. A 401(k) is a voluntary retirement savings plan where employees can contribute a portion of their pre-tax earnings. Many companies match 401(k) contributions on a tax-deductible basis. While employers administer and control the plan, employees can borrow against the value of their 401(k) plan. According to Franchise Gator, some 401(k) plans let employees roll over the money to start a business. An employee’s plan can also rollover when switching from one company to another. 

PSPs 

A PSP stands for Profit-Sharing Plans. A PSP is a retirement plan funded by discretionary employer contributions. As Sofi points out, an employee receives a percentage of a company’s profits based on its earnings. The employer can make contributions on a voluntary basis. This gives employees an opportunity to share in the profits of a company. This plan defers income taxes and asses them on distribution from the account in retirement. This retirement plan is totally controlled by the employer and leaves the employee at the mercy of their employers’ profits. Because of this it is less common and more beneficial for the employer than the employee. 

Offering a retirement plan is a capital and time-intensive way of rewarding your employees. You want to choose what you can afford as an employer and what your employees need. Without offering a quality retirement plan, you risk losing great workers to competing businesses. Analyze the various plans available to determine what is right for your company. 

Read this next: Factors That Matter When Shaping Your Company Culture

Categories

All Categories

Business Operations

Entrepreneur Interviews

Marketing, Networking, & Social Media

Self Care & Personal Development

Working Moms

Business Software and Technology

Entrepreneurship & Small Business

Organizing Tips

Sales

Career Building

Family Businesses

Inspiration

Starting Your Own Business

Work-Life Balance

Communication

Hiring Help

Management & Leadership

Time Management & Priorities

Women in Leadership

Recent Posts

Remember These Expert Tips to Prepare Your Estate

Remember These Expert Tips to Prepare Your Estate

Keep in mind that making estate plans can go a long way towards helping you safeguard your hard-earned money or even a business that you may have. This includes the investment that you’ve spent on ensuring that your home is comfortable and valuable. One of these is safeguarding your home from the likelihood of having flood problems. This is an important detail, especially given the fact that more than 14.6 million homes across America are at a high risk of some kind of flooding problem, according to iProperty Management.

How Entrepreneurs Can Work Through Periods of Stress

How Entrepreneurs Can Work Through Periods of Stress

Entrepreneurship can be an exhilarating journey, but it often comes with its fair share of stress and challenges. The pressure of running a business can sometimes feel overwhelming, and finding effective ways to navigate through periods of stress is crucial for...

Why Entrepreneurs Get Health Goals Wrong

Why Entrepreneurs Get Health Goals Wrong

The life of an entrepreneur is often glamorized, but behind the success stories and Instagrammable moments, there's a grueling reality that can have significant impacts on one's health. Business leaders face unique challenges in balancing work and well-being. We delve...