Business Retirement Plans

According to the National Institute on Retirement Security, “A well-designed retirement plan can provide important financial security for employees and their families, including a source of income in retirement and protection from unexpected financial challenges.” A retirement plan can also save the business money in the long run by providing employees with a sense of ownership in their company and a financial stake in the future. There are many different types of plans based on the type of business and the total number of employees. Here are some of the choices: SEP, SIMPLE, Solo 401(k), 401(k), and now PEPs.

Profit Sharing and 401(K) Plans

As a registered investment advisor, Ironclad Financial offers a comprehensive range of retirement plan services, including 401(k) plans through its partnership with Vestwell. 401(k) plans are a popular type of retirement plan that allow employees to save a portion of their salary on a tax-deferred basis, with some employers offering matching contributions to incentivize participation. With Vestwell, Ironclad Financial offers a modern, technology-driven platform that streamlines plan administration and offers a wide range of investment options to suit employees' needs and goals. The platform also offers robust compliance support and reporting features to help businesses stay on top of regulatory requirements. Overall, Ironclad Financial's 401(k) plans through Vestwell provide an easy-to-use, flexible, and cost-effective solution for businesses looking to offer high-quality retirement benefits to their employees.

Simplified Employee Pension (SEP) IRA

SEP retirement plans are best for businesses that want to offer employees a retirement savings plan that complies with IRS regulations. SEP retirement plans are ideal for businesses with fewer than 100 employees, since they are not subject to the same employer contribution limits as 401(k) plans. Additionally, SEP plans are not subject to the annual $250,000 limit on contributions to 401(k) and other 403(b) plans.

Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA

A SIMPLE IRA (Savings Incentive Match Plan for Employees of Small Employers) is a retirement savings plan that small businesses can set up for their employees. SIMPLE IRA plans have many features that make them attractive to small business owners and employees. The employer contributes to the employee's SIMPLE IRA and the employee can choose to make salary deferral contributions. The money in the SIMPLE IRA grows tax-deferred until it is withdrawn at retirement.

It is best for businesses that had no other retirement plan in place for the previous two tax years and have 100 or fewer employees. With a SIMPLE IRA plan, employers can choose to make either matching or non-elective contributions to their employees' SIMPLE IRAs. The matching contribution amount must be equal to either 3% of each eligible employee's compensation for the year or 2% of each eligible employee's compensation, whichever amount is less. The non-elective contribution must be equal to 2% of each eligible employee's compensation for the year.

Solo 401(K) Plan

The benefits of a solo 401(K) plan are numerous. First and foremost, a solo 401(K) allows employees to save for their own retirement without worrying about their company’s retirement plan. Withdrawing funds before retirement can minimize tax consequences and increase the amount of money available for retirement. Additionally, a solo 401(K) makes it easy to switch jobs and maintain your current retirement savings.

Pooled Employer Plans (PEP)

A new type of retirement plan, called a Pooled Employer Plan (PEP), is being offered by the SECURE Act legislation. A PEP is a multiple employer defined contribution retirement plan (i.e. a 401(k) plan that allows unrelated employers to participate). This new type of retirement plan was established by the SECURE Act legislation and was rolled out on January 1, 2021.At a high level, a PEP is a type of retirement plan that allows unrelated employers to participate. This means that a company can sponsor a PEP and share in the contributions made by all of the sponsoring companies. This can create complications if one of the sponsoring companies goes out of business. Other risks associated with a PEP retirement plan are significant. First, PEPs are not subject to the same regulations as 401(k) plans. This means that PEPs are not obligated to provide matching contributions, and they may not have automatic enrollment features. Additionally, PEPs are not subject to the fiduciary duty that 401(k) plans are subject to. Some of the risks that workers might face include: not being able to easily transfer the account to another employer, not being able to take the account with them when they leave their job, and not being able to access the money if they leave their job before the plan matures.