Small Business Retirement Plans in Greensboro, NC

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Small Business Retirement Plans in Greensboro, NC. Offering a retirement plan to your Greensboro, NC employees offers a variety of benefits, including tax reductions and a great way to attract and retain your highest-performing workers. However, many business owners understandably have questions about small business retirement plans. What type of plan is best for your business? What federal regulations do I have to follow? What happens when I want to change plans, or if I'm closing my business? Correct Capital's team of Greensboro, NC financial planners is committed to helping business owners and their employees get the most out of their retirement plans and navigate the complexity of their individual plans and benefits. Whether you're interested in modifying an existing plan or need to set up a plan, speak to a financial advisor at Correct Capital today at 314-930-401K or contact us online.



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What Types of Retirement Plans Are Available to Small Businesses in Greensboro, NC?

The federal government and various financial custodians offer a wide array of retirement plans and accounts for small business owners and their employees to better prepare for retirement. The most prevalent ones are:


SEP-IRA

This kind of individual retirement account is available to sole proprietor 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 deposits, which are adjustable and can vary year-to-year. Additionally, the contributions are deductible from taxes.

Benefits of a SEP-IRA

  • High Contribution Limits: Employers can contribute up to 25% of each employee’s compensation, with a maximum of $69,000 for 2024.
  • Flexibility: Employers are not required to contribute every year, making it perfect for businesses with variable profits.
  • Simple Administration: The plan requires minimal paperwork and has no annual filing requirements with the IRS except for regular tax filings.

Setting Up a SEP-IRA

  • Select a Financial Institution: You can choose a provider, such as a bank, brokerage firm, or credit union, to hold SEP IRA assets. Alternatively, consider an online financial institution.
  • Execute a Written Agreement: Notify eligible employees by establishing a contractual arrangement for the SEP IRA plan.
  • Make Contributions: Contributions can be made by calculating a predetermined percentage of each employee’s compensation. Alternatively, contribute based on a range of percentages determined by business performance.
  • Maintain Records: Maintaining records involves keeping detailed records of all contributions made to employee accounts, including dates of contribution and sums. Additionally, ensure records are neatly arranged and easily accessible for inspection purposes.

SIMPLE IRA

"SIMPLE" stands for "Savings Investment Match Plan for Employees," and these IRAs are for businesses with up to 100 employees. Employees can fund their own accounts through deductions from their salaries, and employers can also contribute. This plan is affordable 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 suitable 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 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 banking establishment, investment 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 details 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 timely.

Personal Defined Benefit Plan

This plan is specifically for sole proprietor businesses, or those with as many as 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 maximum limit set each year. While this plan is highly customizable and allows for significant contributions, there may be beginning expenditures 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 $$275k 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 plans.
  • 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 financial institution or retirement plan provider that specializes in defined benefit plans to establish the plan.
  • Create a Plan Document: Draft a plan document that details the terms of the plan, including benefit formulas and contribution requirements.
  • Actuarial Calculations: Have a financial analyst calculate the necessary contributions to meet the promised benefits, per 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 five years. Quickly terminated plans often serve as indicators and may attract regulatory scrutiny.

401(k) Plans

401(k)s are available to private companies of any size, and are highly adaptable. Employees may postpone 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:

Benefits of a 401(k) Plan

  • Tax Advantages: Contributions are made before taxes, reducing the employee’s taxable income. 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 this year, employees can contribute up to $$23k, with an additional $seven thousand five hundred dollars 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 various 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 secure them for participants.
  • Develop a Recordkeeping System: Keep accurate records 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 i401(k), this plan is designed to offer the same benefits as a company 401(k), but for individuals who are sole proprietors, 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 additional 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: Pick 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: Create the terms of your plan, including contribution limits, investment options, and loan provisions.
  • Open an Account: Establish your Individual 401(k) account with the chosen provider. This typically involves completing an application and providing necessary documentation.
  • Make Contributions: Determine 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. Keep accurate records 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 encourage them to contribute to the company’s profitability.

Benefits of a Profit Sharing Plan

  • Flexibility in Contributions: Employers can choose 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 without immediate tax, which can benefit employees' long-term savings.
  • Employee Motivation and Retention: Linking contributions to company profits can enhance 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 $sixty-six thousand dollars for this year, making it a generous option for employee benefits.

Setting Up a Profit Sharing Plan

  • Choose a Plan Provider: Pick a financial institution or retirement plan provider to administer the plan.
  • Create a Plan Document: Draft a plan document outlining the profit-sharing formula, eligibility requirements, and vesting schedule.
  • Communicate with Employees: Notify 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 annually 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 enhance drive and loyalty.
  • Tax Benefits for the Company: Contributions to the ESOP are tax-deductible, and the company can also gain tax benefits related to the sale of stock to the ESOP.
  • Retirement Savings for Employees: Employees benefit from the growth in the value of the company’s stock, offering potentially significant retirement savings.
  • Succession Planning: ESOPs can be an effective tool for business succession, enabling owners to sell their shares to high-performing employees, who can gradually take the lead as previous owners ease into retirement.

Setting Up an ESOP

  • Feasibility Study: Perform a feasibility study to determine if an ESOP is a appropriate option for your company.
  • Hire ESOP Advisors: Retain financial, legal, and ESOP advisors to aid in the setup process.
  • Create a Plan Document: Prepare a plan document that details the terms of the ESOP, including how shares will be distributed and vested.
  • Establish a Trust: Establish 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 ensure compliance.

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 economical 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 decrease administrative costs and fees associated with maintaining a retirement plan. This cost-sharing makes MEPs an appealing option for small businesses looking to save on expenses.
  • Administrative Efficiency: MEPs ease the management of retirement plans by centralizing 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 can provide competitive retirement benefits, which can help to attract and retain talented employees and create the business access to a competitive advantage they wouldn't be able to have on their own.
  • 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 bank 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: Inform 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 advantages, fees, required minimum distributions, contribution limits, and more. A renowned 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 Greensboro, NC

The particular, financial-based advantages to your Greensboro, NC small business retirement plan will largely be based on the specific plan you set up. However, a small business retirement plan, whichever one you choose, has universal benefits. Three out of five workers responded to a survey saying it is a "very important" factor in job satisfaction, while employers reap the benefits both during tax season and in office productivity. Companies and employees will both enjoy:


Employee Benefits

  • More confidence in their retirement planning
  • Tax deductions
  • Contributions can be easily made through payroll deductions
  • Contributions and investment gains are not taxed until they take them out
  • Over the years small contributions grow into significant sums of money
  • Ability to perform a 401(k) rollover if they change employers

Business Benefits

  • Attract, recruit, and retain high performers
  • Promote great work ethic
  • Deduct your taxable income from your taxable profits
  • Flexible plan options to fit your plan to your needs
  • Tax credits that can help reduce startup costs

Do I Need a Financial Advisor in Greensboro, NC to Help With My Small Business Retirement Plan?

Setting up small business retirement plans is far different from setting up a personal account at your local Greensboro, NC bank. While the federal government does not currently require any company to offer a retirement plan to employees, some states require businesses of a certain size to have a retirement plan. Greensboro, NC retirement consultants that have spent years helping business owners set up retirement plans are usually needed to not only ensure the plan is right for you, but that you abide by ever-changing tax and business laws.

As your Greensboro, NC retirement plan consultants for your small business, our advisers will:

  • Help you choose 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, arranging a trust for plan assets, helping employees understand the plan's terms, and developing a record keeping system
  • Help you operate your plan by adapting as we need to to 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 part of their continued financial health

Correct Capital's Greensboro, NC financial planners are fiduciary advisors, meaning we are legally and ethically obligated to only work in your best interest. We work for you, and not our own firm. Request a meeting 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 decreased 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 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 documentation, compliance, and record-keeping tasks. Providers offer comprehensive administrative support, including payroll processing and fiduciary management.
  • Multiple Employer Plans (MEPs): Joining 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 increase participation and savings rates.
  • Employee Education: Providing regular education and communication about the benefits of the retirement plan can help increase employee engagement. Host 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. We 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: Select 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 help of dedicated Greensboro, NC 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 Greensboro, NC include:

Small Business Retirement Plans Greensboro, NC | Financial Advisors | Retirement Consultants Near Greensboro

Small Business Retirement Plans in Greensboro, NC | Correct Capital

Operating a small business comes with a mountain of 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 in both small and large companies, 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 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

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