Small Business Retirement Plans in Eugene, OR

Small Business Retirement Plans in Eugene, OR. Offering a retirement plan to your Eugene, OR employees is a great way to retain talent, incentivize higher performance, and get those much-desired tax reductions. However, for most business owners, it can be hard to know where to start. What benefits do different kinds of plans provide? What are the different laws that apply to different plans? What happens when a new plan seems like a better option, or if I'm closing my business? Correct Capital's team of Eugene, OR financial planners has over 70 years of combined experience helping business owners and their employees get the most out of their retirement plans and understanding the specifics of financial law. Whether you already have a plan and want insight as to how it's performing or are looking to create an entirely new one, call Correct Capital today at 314-930-401K or contact us through our website.

What Types of Retirement Plans Are Available to Small Businesses in Eugene, OR?

The federal government provides a wide array of investment options and savings vehicles for small business owners and their employees in anticipation of retirement. Among the most common are:

SEP-IRA

This type of individual retirement account is available to owner-only businesses, freelancers, and businesses with very few employees. It follows the similar 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 contributions, which are flexible and can vary year-to-year. Additionally, the contributions are eligible for tax deduction.

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: The plan does not require employers to contribute annually, which is perfect for businesses with changing profits.
• Simple Administration: The plan requires minimal paperwork and does not require annual filings with the IRS except for regular tax filings.

Setting Up a SEP-IRA

• Select a Financial Institution: To hold SEP IRA assets, select an institution for instance a bank, brokerage firm, or credit union. You can also opt for a digital financial institution.
• Execute a Written Agreement: Create a contractual arrangement and advise eligible employees.
• Make Contributions: Contributions can be made by calculating a set percentage of each employee’s compensation. Alternatively, deposit funds based on a variable percentage determined by business profits.
• Maintain Records: To maintain records, keep comprehensive records of all contributions made to employee accounts, including time stamps and sums. Additionally, ensure records are organized and easily accessible for inspection purposes.

SIMPLE IRA

"SIMPLE" stands for "Savings Investment Match Plan for Employees," and these IRAs are for businesses with as many as 100 employees. Employees can make contributions to their own accounts through salary deferrals, and employers can also make contributions. 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 simple to establish and maintain, with no annual filing requirements for employers. This makes them perfect for small businesses with restricted administrative resources.
• Employer Contributions: Employers are required to make contributions, either by 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 additional catch-up contribution of $3,500 for those aged 50 and older.
• Immediate Vesting: All contributions to the SIMPLE IRA are immediately 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 bank, mutual fund, or investment brokerage 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 details on how to participate and the benefits provided.
• Employee Enrollment: Assist employees in setting up their accounts and making their contributions.
• Employer Contributions: Decide whether to match employee contributions or make non-elective contributions, and ensure these are made timely.

Personal Defined Benefit Plan

This plan is solely for sole proprietor businesses, or those with up to 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 recurring costs 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 the current year) 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-deferred until distribution.

Setting Up a Personal Defined Benefit Plan

• Consult with a Plan Provider: Work with a bank or retirement plan provider that specializes in defined benefit plans to establish the plan.
• Create a Plan Document: Draft a scheme document that details the terms of the plan, including benefit formulas and contribution requirements.
• Actuarial Calculations: Have an actuary calculate the necessary contributions to meet the promised benefits, per IRS requirements.
• Annual Administration: Managing the plan’s investments includes ensuring that required contributions are made annually. Annual actuarial reviews are necessary to adjust for any changes in funding requirements.
• Compliance and Reporting: To report on the plan’s status and compliance, file IRS Form 5500 annually.
• Permanence: To ensure compliance, a defined benefit plan must be in place for a minimum of five years. Plans that are quickly terminated can be indicators and subject to regulatory scrutiny.

401(k) Plans

401(k)s are available to private companies of any size, and are highly flexible. 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 without immediate tax.
• Employer Matching: Many employers offer matching contributions, which can significantly boost an employee's retirement savings.
• Higher Contribution Limits: For this year, employees can contribute up to $$23k, with an additional $7,500 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 options, management assistance, and staff training.
• Create a Plan Document: Detail the terms of the plan, including eligibility, contributions, and how funds are vested.
• Set Up a Trust: Ensure plan assets are held in trust to protect them for participants.
• 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 updates 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 company 401(k), but for individuals who are self-employed, 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 non-elective 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: Select a financial institution or brokerage that offers Individual 401(k) plans. Search for providers with multiple investment options and reduced 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: Set 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 $250,000, you must file IRS Form 5500 annually. Ensure detailed records of all contributions and transactions.

Profit Sharing Plans

A Profit Sharing Plan is a type of retirement plan where employers can make discretionary 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 contribute to the company’s profitability.

Benefits of a Profit Sharing Plan

• Flexibility in Contributions: Employers can decide each year how much to contribute based on the company's profitability. This makes it an versatile option for businesses with changing earnings.
• Tax Advantages: Contributions are tax-deductible for the business, reducing taxable income. Additionally, the funds grow tax-free until withdrawal, which can benefit employees' long-term savings.
• Employee Motivation and Retention: Linking contributions to company profits can increase employee morale and loyalty, as employees directly benefit from the company’s success.
• High Contribution Limits: Employers can contribute up to the lesser of a quarter of an employee’s compensation or $$66k for this year, making it a advantageous option for employee benefits.

Setting Up a Profit Sharing Plan

• Choose a Plan Provider: Select a bank or retirement plan provider to administer the plan.
• Create a Plan Document: Prepare 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: Yearly 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 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.

Benefits of an ESOP

• Employee Ownership: ESOPs provide employees with an equity share in the company, which can boost incentive and loyalty.
• Tax Benefits for the Company: Contributions to the ESOP are eligible for tax deduction, and the company can also gain 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, providing potentially considerable retirement savings.
• Succession Planning: ESOPs can be an effective method for business succession, permitting owners to sell their shares to high-performing employees, who can steadily take the lead as previous owners transition into retirement.

Setting Up an ESOP

• Feasibility Study: Perform a feasibility study to determine if an ESOP is a viable option for your company.
• Hire ESOP Advisors: Bring on board financial, legal, and ESOP advisors to facilitate the setup process.
• Create a Plan Document: Draft a plan document that outlines the terms of the ESOP, including how shares will be allocated and vested.
• Establish a Trust: Create an ESOP trust to hold the company stock on behalf of employees.
• Communicate with Employees: Educate employees about the ESOP, how it works, and the advantages 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 participate in 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 favorable option for small businesses looking to save on expenses.
• Administrative Efficiency: MEPs simplify the management of retirement plans by consolidating administrative tasks. This includes plan setup, compliance, reporting, and participant communication, which are handled by the MEP sponsor or administrator.
• Improved Access to Benefits: Through an MEP, small businesses that might not have the resources to set up a retirement plan on their own to deliver competitive retirement benefits, helping to attract and retain talented employees and give a competitive advantage in hiring they otherwise may not have had.
• Fiduciary Relief: The MEP sponsor typically assumes most of the fiduciary responsibilities, decreasing 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 join 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 a financial institution 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: Communicate 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, submitting required documents, and managing plan assets.

There are pros and cons 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 respected financial advisor like those at Correct Capital will be able to help you determine which plan works best for you and your team.

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Benefits of Setting Up a Small Business Retirement Plan in Eugene, OR

The particular, financial-based advantages to your Eugene, OR small business retirement plan will largely be based on the specific plan you set up. That said, there are many general benefits of setting up a small business retirement plan for both businesses and workers. Over half of workers responded to a survey saying it is a "very important" factor in how good they feel at their present employment, while employers reap the benefits both during tax season and in office productivity. Below are some of the main benefits for both businesses and employees of having a small business retirement plan:

Why Should I Consult With a Financial Advisor in Eugene, OR to Help With My Small Business Retirement Plan?

Opening small business retirement plans is far different from setting up a personal savings plan at your local Eugene, OR bank. While the federal government does not currently obligate any company to offer retirement savings options to workers, certain states require businesses with a certain number of employees to offer access to a retirement plan. Eugene, OR retirement consultants that have spent years helping business owners establish retirement plans are usually needed to not only make sure you get the benefits you're looking for, but that you follow frequently chancing tax and business laws.

As your Eugene, OR retirement plan consultants for your small business, our advisers will:

• Help you elect which plan works best for you and your employees, and the right custodian to hold plan assets
• Assist you in establishing your plan, including adopting a written plan, establishing a trust for plan assets, helping employees understand the plan's terms, and creating a record keeping system
• Help you operate your plan by staying compliant with applicable 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 important aspect of their continued financial health

Correct Capital's Eugene, OR advisors hold ourselves to the fiduciary standard, meaning we are legally and ethically obligated to only work in your best interest. We work for you, and not our own firm. Schedule a consultation with a member of our advisor team today.

Common Challenges and Solutions in Small Business Retirement Plans

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Challenge 1: High Setup and Administrative Costs

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

Solution:

• SIMPLE IRA and SEP IRA: These plans have minimal 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, with an additional credit for automatic enrollment plans.

Challenge 2: Administrative Complexity

The complexity 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 administrative tasks, compliance, and record-keeping tasks. Providers offer comprehensive administrative support, including integration with payroll and fiduciary responsibilities.
• Multiple Employer Plans (MEPs): Participating in 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: Implementing 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 boost 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.

Issue 4: Regulatory Compliance

Navigating 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 change with 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. Update the plan as necessary to align with changes in your business environment and workforce demographics.

With the assistance of dedicated Eugene, OR 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 Eugene, OR include:

• Financial Planning
• Retirement Plan Consultants
• Fiduciary Financial Advisor

Small Business Retirement Plans in Eugene, OR | Correct Capital

Owning a small business comes with a plethora of daily, monthly, and annual tasks to ensure things run smoothly — navigating the complexities of a small business retirement plan shouldn't be one of them. Correct Capital currently manages over 37 plans in both small and large companies, and represents over $212 million in total plan assets* across the United States. To set up a retirement plan for your small business, or learn what other services we offer to business owners, speak to a financial advisor at Correct Capital today at 314-930-401K or contact us online.

*as of March 2024