Small Business Retirement Plans in Chula Vista, CA

Small Business Retirement Plans in Chula Vista, CA. Setting up a retirement plan for you and your Chula Vista, CA employees is a great way to retain talent, boost performance, and get those much-needed tax reductions. While the benefits may be clear, the difficulties of setting up and maintaining small business retirement plans are not. What type of plan is best for your business? What are the different laws I'll have to follow? What do I do when I want to change plans, or if I'm retiring and my business will no longer be running? Correct Capital's team of Chula Vista, CA financial planners is committed to helping business owners and their employees reap the benefits of having a sound retirement plans and understanding the specifics of federal regulations. Whether you already have a plan and want insight as to how it's performing or need to set up a plan, speak to a financial advisor at Correct Capital today at 314-930-401K or contact us online.

---

Schedule a Meeting With an Advisor Today

Correct Capital Wealth Management's office is physically located in St. Louis, MO, but we serve clients throughout the United States in both personal financial planning and corporate retirement plans.

Schedule a 15-Minute Introductory Call

---

What Types of Retirement Plans Are Available to Small Businesses in Chula Vista, CA?

The federal government and various financial custodians offer a variety of savings plans and programs for small business owners and their employees in anticipation of retirement. The most prevalent ones are:

SEP-IRA

This kind of individual retirement account is available to owner-only businesses, freelancers, and businesses with very few employees. It follows the identical rules as a traditional IRA, where the money put into the account grows tax-deferred. Employers can deduct contributions they make on behalf of their employees. Only employers make payments, which are modifiable and can vary year-to-year. Additionally, the contributions are tax-deductible.

Benefits of a SEP-IRA

• High Contribution Limits: Employers have the ability to contribute up to 25% of each employee’s compensation, with the maximum set at $69,000 for 2024.
• Flexibility: For businesses with changing profits, this plan is perfect as employers are not obligated to contribute every year.
• Simple Administration: Minimal paperwork and no need for yearly filings with the IRS beyond regular tax filings.

Setting Up a SEP-IRA

• Select a Financial Institution: Choose a company to hold SEP IRA assets, such as a bank, brokerage firm, or credit union. Alternatively, opt for a virtual financial institution.
• Execute a Written Agreement: Establish a contractual arrangement and advise eligible employees of the SEP IRA plan.
• Make Contributions: Calculate and make contributions based on a predetermined percentage of each employee’s compensation. Alternatively, deposit funds based on a variable percentage determined by business earnings.
• Maintain Records: Maintaining records involves keeping detailed records of all contributions made to employee accounts, including time stamps and amounts. Additionally, ensure records are well-organized and easily accessible for review purposes.

SIMPLE IRA

"SIMPLE" stands for "Savings Investment Match Plan for Employees," and these IRAs are for businesses with a maximum of 100 employees. Employees can make contributions to their own accounts through payroll deductions, and employers can also contribute. This plan is low-cost as it's mainly funded by employees, and their contributions can be deductible from taxes.

Benefits of a SIMPLE IRA

• Ease of Setup and Administration: SIMPLE IRAs are easy to establish and maintain, with no need for yearly filings for employers. This makes them perfect for small businesses with constrained administrative resources.
• Employer Contributions: Employers are required to make contributions, by either matching employee contributions up to 3% of their salary or making a non-elective contribution of 2% of each eligible employee’s salary.
• Employee Contributions: Employees can contribute up to $16,000 in 2024, with an extra catch-up contribution of $3,500 for those aged 50 and older.
• Immediate Vesting: All contributions to the SIMPLE IRA are instantly 100% vested, meaning employees have full ownership of all funds in their accounts as soon as contributions are made.

Setting Up a SIMPLE IRA

• Select a Financial Institution: Choose a banking establishment, mutual fund, or brokerage firm to hold the SIMPLE IRA assets.
• Execute a Written Agreement: Use IRS Form 5304-SIMPLE or 5305-SIMPLE to create a written agreement outlining the terms of the plan.
• Employee Notification: Notify eligible employees about the plan, including information on how to participate and the benefits provided.
• Employee Enrollment: Assist employees in establishing their accounts and making their contributions.
• Employer Contributions: Decide whether to match up to employee contributions or make non-elective contributions, and ensure these are made in a timely manner.

Personal Defined Benefit Plan

This plan is exclusively for sole proprietor businesses, or those with a maximum of 5 employees. With this plan, you target a desired level of retirement income, and contribution limits are adjusted each year based on that, with a yearly cap. While this plan is highly customizable and allows for significant contributions, there may be startup costs and annual fees associated with it.

Benefits of a Personal Defined Benefit Plan

• High Contribution Limits: Allows for significantly higher contributions compared to other retirement plans, potentially reaching $275,000 annually (in 2024) depending on age, income, and the desired retirement benefit.
• Predictable Retirement Benefits: The plan promises a specific benefit at retirement, providing more predictability for retirement planning compared to defined contribution plans like 401k accounts.
• Tax Advantages: Contributions are tax-deductible, reducing current taxable income. The investments grow tax-free until distribution.

Setting Up a Personal Defined Benefit Plan

• Consult with a Plan Provider: Work with a bank or retirement plan provider that has experience with defined benefit plans to establish the plan.
• Create a Plan Document: Draft a written plan that details the terms of the plan, including contribution requirements and how benefits are calculated.
• Actuarial Calculations: Have a financial analyst calculate the necessary contributions to meet the promised benefits, ensuring compliance with IRS requirements.
• Annual Administration: To manage the plan’s investments, ensure that required contributions are made annually and conduct annual actuarial reviews to adjust for any changes in funding requirements.
• Compliance and Reporting: File IRS Form 5500 annually to report on the plan’s status and compliance.
• Permanence: A defined benefit plan should be maintained for at least five years. Quickly terminated plans often serve as indicators and may attract regulatory scrutiny.

401(k) Plans

401(k)s are available to companies of any size, and are highly adaptable. Employees may defer their salary as contributions, and employers can make annual contributions. Most 401(k) plans come with significant tax planning advantages for both businesses and employees. They can include:

• Traditional 401(k)s
• Safe Harbor 401(k)s
• Automatic enrollment 401(k)s

Benefits of a 401(k) Plan

• Tax Advantages: To reduce the employee’s taxable income, contributions are made pre-tax. Alternatively, contributions can be made post-tax (Roth). Investments grow tax-deferred.
• Employer Matching: Many employers offer contribution matching, which can significantly boost an employee's retirement savings.
• Higher Contribution Limits: For 2024, employees can contribute up to $23,000, with an additional $$7.5k catch-up contribution for those aged 50 and older.
• Loan Options: Participants can often take loans against their 401(k) balance, providing flexibility in case of urgent financial needs.

Setting Up a 401(k) Plan

• Choose a Plan Provider: Select a provider that offers multiple investment choices, administrative services, and staff training.
• Create a Plan Document: Outline the terms of the plan, including eligibility, contributions, and vesting schedules.
• Set Up a Trust: Ensure plan assets are held in trust to safeguard them for employees.
• Develop a Recordkeeping System: Develop a meticulous record system of contributions, earnings, and distributions.
• Distribute Plan Information: Employers sponsoring a 401(k) must distribute plan information and modifications in a timely manner.

Individual 401(k)

Also known as a Individual 401(k), this plan is designed to offer the same benefits as a business 401(k), but for individuals who are independent contractors, or whose only employee is their spouse. Each year, you can contribute up to the annual 401(k) limit, and the employer may make a nonelective contribution up to 25% of compensation or, if self-employed, an amount considering your earned income and deducting half of self-employment tax paid and contributions made by you during the year. Another advantage of individual 401(k)s is that you can opt to open a Roth 401(k) account, or roll over pre-tax assets.

Setting Up an Individual 401(k)

• Choose a Plan Provider: Choose a financial institution or brokerage that offers Individual 401(k) plans. Seek out providers with various investment options and lower fees.
• Create a Plan Document: Prepare the terms of your plan, including contribution limits, investment options, and loan provisions.
• Open an Account: Set up your Individual 401(k) account with the chosen provider. This typically involves completing an application and providing necessary documentation.
• Make Contributions: Decide on your contribution amounts for the year and make regular contributions. Ensure you stay within the IRS limits for total contributions.
• Compliance and Reporting: If your plan assets exceed $two hundred fifty thousand dollars, you must file IRS Form 5500 annually. Develop a meticulous record system of all contributions and transactions.

Profit Sharing Plans

A Profit Sharing Plan is a type of retirement plan where employers can make voluntary contributions to employee retirement accounts, determined by the company's profits. These plans are intended to share the company’s success with its employees and motivate them to enhance the company’s profitability.

Benefits of a Profit Sharing Plan

• Flexibility in Contributions: Employers can determine each year how much to contribute based on the company's profitability. This makes it an versatile option for businesses with variable earnings.
• Tax Advantages: Contributions are tax-deductible for the business, reducing taxable income. Additionally, the funds grow without immediate tax, which can benefit employees' long-term savings.
• Employee Motivation and Retention: Linking contributions to company profits can boost employee morale and loyalty, as employees directly benefit from the company’s success.
• High Contribution Limits: Employers can contribute up to the lesser of one-fourth of an employee’s compensation or $$66k for this year, making it a generous option for employee benefits.

Setting Up a Profit Sharing Plan

• Choose a Plan Provider: Select a investment firm or retirement plan provider to administer the plan.
• Create a Plan Document: Develop a plan document outlining the profit-sharing formula, eligibility requirements, and vesting schedule.
• Communicate with Employees: Educate employees about the plan, how it works, and the benefits they can expect.
• Determine Contributions: Each year decide the amount to contribute based on company profits and the predetermined formula.
• File Necessary Forms: File IRS Form 5500 every year to report the plan’s status and compliance.

Employee Stock Ownership Plan (ESOPs)

An Employee Stock Ownership Plan (ESOP) is a retirement plan that invests primarily in the employer's stock. ESOPs give employees ownership interest in the company, aligning their interests with the business's success, and potentially helping set up the business's next generation of leadership.

An Employee Stock Ownership Plan (ESOP) is a retirement plan that primarily invests in the employer's stock. ESOPs offer employees a stake in the company, aligning their interests with the business's success, and potentially helping establish the business's next generation of leadership.

Benefits of an ESOP

• Employee Ownership: ESOPs grant employees with an partial ownership in the company, which can enhance motivation and commitment.
• Tax Benefits for the Company: Contributions to the ESOP are eligible for tax deduction, and the company can also receive tax benefits associated with the sale of stock to the ESOP.
• Retirement Savings for Employees: Employees gain from the growth in the value of the company’s stock, granting potentially considerable retirement savings.
• Succession Planning: ESOPs can be an effective strategy for business succession, permitting owners to sell their shares to their best employees, who can slowly take the lead as previous owners transition into retirement.

Setting Up an ESOP

• Feasibility Study: Execute a feasibility study to determine if an ESOP is a appropriate option for your company.
• Hire ESOP Advisors: Bring on board financial, legal, and ESOP advisors to facilitate the setup process.
• Create a Plan Document: Write a plan document that outlines the terms of the ESOP, including how shares will be apportioned and vested.
• Establish a Trust: Establish an ESOP trust to hold the company stock on behalf of employees.
• Communicate with Employees: Brief employees about the ESOP, how it works, and the perks they can expect.
• Compliance and Reporting: File necessary documents with the IRS and the Department of Labor, including Form 5500, to keep your plan compliant.

Multiple Employer Plans (MEPs)

A Multiple Employer Plan (MEP) is a type of retirement plan that allows multiple, unrelated employers to join a single retirement plan and achieve economies of scale. MEPs are designed to provide small businesses with a cost-effective and administratively efficient way to offer retirement benefits to their employees.

Benefits of an MEP

• Cost Savings: By sharing resources with other employers, businesses can reduce administrative costs and fees associated with maintaining a retirement plan. This cost-sharing makes MEPs an advantageous option for small businesses looking to save on expenses.
• Administrative Efficiency: MEPs facilitate the management of retirement plans by combining administrative tasks. This includes plan setup, compliance, reporting, and participant communication, which are handled by the MEP sponsor or administrator.
• Improved Access to Benefits: Small businesses that might not have the resources to offer a retirement plan on their own can provide competitive retirement benefits through an MEP, which can help to attract and retain talented employees and offer a competitive advantage in hiring they otherwise may not have had.
• Fiduciary Relief: The MEP sponsor typically assumes most of the fiduciary responsibilities, diminishing the liability and administrative burden on individual employers.

Setting Up an MEP

• Join an Existing MEP or Form a New One: Small businesses can either participate in an existing MEP or collaborate with other businesses to form a new one. This step involves selecting a MEP sponsor who will manage the plan.
• Select a Plan Provider: The MEP sponsor will work with an investment firm or retirement plan provider to administer the plan.
• Adopt the Plan: Each participating employer must formally adopt the MEP by executing an adoption agreement and providing necessary employee information.
• Employee Enrollment: Explain the plan details to employees and facilitate their enrollment in the MEP.
• Ongoing Administration: The MEP sponsor handles the majority of the administrative tasks, including compliance with IRS and Department of Labor requirements, filing necessary forms, and managing plan assets.

There are benefits and drawbacks to each plan, and which may be "best" for you will depend on your business and your and your employees' needs. Different plans and accounts have different tax incentives, fees, required minimum distributions, contribution limits, and more. A trusted financial advisor like those at Correct Capital will be able to help you determine which plan works best for you and your team.

---

---

Why You Should Set Up a Small Business Retirement Plan in Chula Vista, CA

The specific, financial-based benefits for your Chula Vista, CA small business retirement plan is dependent upon which plan you set up. That said, a small business retirement plan, whichever one you choose, benefit employers and employees in the same way. 60% of workers say that a retirement plan is a "very important" factor in how good they feel at their present employment, while employers also get tax breaks and can better attract and motivate employees. Below are some of the main benefits for both businesses and employees of setting up a small business retirement plan:

Why Should I Consult With a Financial Advisor in Chula Vista, CA to Help With My Small Business Retirement Plan?

Creating small business retirement plans is complicated. While the federal government does not currently obligate any employer to offer a retirement plan to employees, some states require employers of a certain size to offer access to a retirement plan. Chula Vista, CA retirement consultants that have spent years helping business owners establish retirement plans are usually needed to not only ensure the plan is right for you, but that you abide by evolving tax and business laws.

As your Chula Vista, CA retirement plan consultants for your small business, our financial planners will:

• Help you elect the best plan for you, and which financial institution should hold the assets
• Assist you in setting up your plan, including adopting a written plan, establishing a trust for plan assets, helping employees understand how specific of the plan apply to their savings, and implementing a record keeping system
• Help you operate your plan by adapting as we need to to relevant laws, managing the plan's assets, and distributing benefits
• Help educate your employees on your plan, its benefits, and how they can use it as a part of their continued financial success

Correct Capital's Chula Vista, CA financial planners are fiduciary advisors, meaning we are obligated, by law and by ethics to do what's best for you and your employees. The only product we offer is trust. Request a consultation with a member of our advisor team today.

Common Challenges and Solutions in Small Business Retirement Plans

---

Challenge 1: High Setup and Administrative Costs

Many small businesses hesitate to set up retirement plans due to the perceived high costs.

Solution:

• SIMPLE IRA and SEP IRA: These plans have lower setup and administrative costs compared to traditional 401(k) plans.
• Tax Credits: The SECURE Act 2.0 offers tax credits for small businesses to offset the costs of setting up retirement plans. Businesses can receive a credit of up to $5,000 annually for three years to cover startup costs, and an additional credit for automatic enrollment plans.

Challenge 2: Administrative Complexity

The challenges of maintaining a retirement plan can be daunting for small business owners.

Solution:

• Outsource Administration: Many plan providers offer administrative services that can handle the majority of the paperwork, compliance, and record-keeping tasks. Providers offer comprehensive administrative support, including payroll processing and fiduciary management.
• Multiple Employer Plans (MEPs): Being part of an MEP can significantly reduce the administrative burden as the MEP sponsor handles most of the administrative duties, including compliance and reporting.

Challenge 3: Employee Participation and Engagement

Low employee participation can limit the effectiveness of a retirement plan.

Solution:

• Automatic Enrollment: Using automatic enrollment can significantly increase participation rates. Employees are automatically enrolled at a default contribution rate but can opt out if they choose. This approach has been shown to raise participation and savings rates.
• Employee Education: Providing regular education and communication about the benefits of the retirement plan can help increase employee engagement. Provide workshops, seminars, and one-on-one meetings to ensure employees understand how the plan works and the importance of saving for retirement. Correct Capital offers employee education, including one-on-one meetings and quarterly webinars, if you choose us as your retirement plan advisors.

Problem 4: Adhering to Regulations

Managing the complex regulatory landscape can be challenging, especially for business owners who need to keep their attention on their core business.

Solution:

• Professional Guidance: Hiring a financial advisor or consultant who specializes in retirement plans can help ensure compliance with ERISA, IRS, and Department of Labor regulations. Correct Capital can assist with plan setup, annual filings, and ongoing management.
• Use of Technology: Many retirement plan providers offer online platforms that help manage compliance by automating reporting, tracking contributions, and ensuring that all regulatory requirements are met.

Challenge 5: Flexibility and Adaptability

Business owners need plans that can adjust to changing business conditions.

Solution:

• Flexible Plans: Opt for retirement plans that offer flexibility in contributions. SEP IRAs, for example, allow employers to decide each year how much to contribute based on the company’s profitability, making it a suitable option for businesses with variable income.
• Regular Plan Reviews: Conduct regular reviews of your retirement plan to ensure it continues to meet the needs of your business and employees. Modify the plan as necessary to align with changes in your business environment and workforce demographics.

With the support of dedicated Chula Vista, CA financial advisors and retirement plan specialists, your business can navigate these challenges to create a small business retirement plan that works for both you and your employees.

Other services we offer in Chula Vista, CA include:

• 401(k) Audit
• High-Net-Worth Wealth Management
• Retirement Planner
• Financial Planning
• Retirement Plan Consultants
• Fiduciary Financial Advisor
• Self-Employed Retirement Plans

Small Business Retirement Plans in Chula Vista, CA | Correct Capital

Owning a small business involves countless daily, monthly, and annual tasks to ensure things run smoothly — navigating the complexities of a small business retirement plan doesn't have to be one of them. Correct Capital currently manages over 37 plans for a variety of types of businesses, and represents over $212 million in total plan assets* throughout the country. To set up a retirement plan for your small business, or learn what we can do for business owners, call Correct Capital today at 314-930-401K or contact us through our website.

*as of March 2024