Small Business Retirement Plans in Pembroke Pines, FL

Small Business Retirement Plans in Pembroke Pines, FL. Setting up a retirement plan for you and your Pembroke Pines, FL employees is a great way to retain talent, boost performance, and get those much-needed tax breaks. While the benefits may be clear, the complexities of establishing and maintaining small business retirement plans are not. 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 retiring and my business will no longer be running? Correct Capital's team of Pembroke Pines, FL financial planners is committed to helping business owners and their employees reap the rewards of having a sound retirement plans and understanding the specifics of their individual plans and benefits. 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 through our website.

What Types of Retirement Plans Are Available to Small Businesses in Pembroke Pines, FL?

Various financial custodians provide numerous investment options and retirement accounts for small business owners and their employees in anticipation of retirement. Among the most common are:

SEP-IRA

This kind of individual retirement account is available to self-employed businesses, freelancers, and businesses with very few employees. It follows the same rules as a traditional IRA, where the money put into the account grows tax-free. Employers can deduct contributions they make on behalf of their employees. Only employers make contributions, which are flexible and can vary from year to year. Additionally, the contributions are eligible for tax deduction.

Benefits of a SEP-IRA

• High Contribution Limits: For 2024, employers are allowed to contribute up to 25% of each employee’s compensation, with a cap of $69,000.
• Flexibility: The plan does not require employers to contribute annually, which is suitable 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: Communicate with eligible employees by establishing a written agreement for the SEP IRA plan.
• Make Contributions: To make contributions, calculate an established percentage of each employee’s compensation. Alternatively, contribute based on a percentage range determined by business performance.
• Maintain Records: Ensure you keep detailed records of all contributions made to employee accounts, including dates 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 a maximum of 100 employees. Employees can fund their own accounts through deductions from their salaries, and employers can also contribute. This plan is inexpensive as it's mainly funded by employees, and their contributions can be eligible for tax deduction.

Benefits of a SIMPLE IRA

• Ease of Setup and Administration: SIMPLE IRAs are easy 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 a supplementary 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 bank, 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 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 in a timely manner.

Personal Defined Benefit Plan

This plan is solely for single-owner 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 an annual maximum limit. While this plan is highly customizable and allows for significant contributions, there may be initial expenses 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 $$275k 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 401(k)s.
• 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 scheme document 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, 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: Ensure compliance by filing IRS Form 5500 annually to report on the plan’s status.
• Permanence: A defined benefit plan needs to be in place for at least five years. Plans established that are quickly terminated are often red flags and open to regulatory scrutiny.

401(k) Plans

401(k)s are available to corporations of any size, and are highly tailorable. Employees may allocate their salary as contributions, and employers can make contributions every year. 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: Contributions can be made tax-free initially, which reduces the employee’s taxable income. Alternatively, post-tax (Roth) contributions can be made. Investments grow tax-deferred.
• Employer Matching: Many employers offer matching contributions, which can significantly boost an employee's retirement savings.
• Higher Contribution Limits: For the current 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 opportunities, management assistance, and staff training.
• Create a Plan Document: Detail 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 participants.
• Develop a Recordkeeping System: Maintain precise records of contributions, earnings, and distributions.
• Distribute Plan Information: Employers sponsoring a 401(k) must distribute plan information and changes in a timely manner.

Individual 401(k)

This plan, also known as a Individual 401(k), is designed to provide the same benefits as a traditional 401(k), but specifically 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 one-fourth 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. Additionally, you have the option 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. Search for providers with various investment options and lower fees.
• Create a Plan Document: Establish 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 submitting 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 $two hundred fifty thousand dollars, 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 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 incentivize them to boost 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 flexible option for businesses with variable earnings.
• Tax Advantages: Contributions are tax-deductible for the business, reducing taxable income. Additionally, the funds grow tax-deferred, 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 $sixty-six thousand dollars for 2024, making it a advantageous option for employee benefits.

Setting Up a Profit Sharing Plan

• Choose a Plan Provider: Pick a investment firm 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: Annually 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 offer employees with an ownership stake in the company, which can heighten incentive and commitment.
• Tax Benefits for the Company: Contributions to the ESOP are deductible from taxes, 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, offering potentially considerable 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 steadily take the lead as previous owners transition into retirement.

Setting Up an ESOP

• Feasibility Study: Conduct a feasibility study to determine if an ESOP is a suitable option for your company.
• Hire ESOP Advisors: Hire financial, legal, and ESOP advisors to facilitate the setup process.
• Create a Plan Document: Develop a plan document that defines the terms of the ESOP, including how shares will be assigned and vested.
• Establish a Trust: Form an ESOP trust to hold the company stock on behalf of employees.
• Communicate with Employees: Inform employees about the ESOP, how it works, and the benefits 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 economical and administratively efficient way to offer retirement benefits to their employees.

Benefits of an MEP

• Cost Savings: By combining 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 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: Through an MEP, small businesses that might not have the resources to offer a retirement plan on their own can provide 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, lessening 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 an investment firm or retirement plan provider to administer the plan.
• Adopt the Plan: Each participating employer must formally adopt the MEP by signing 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, 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 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.

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Benefits of Setting Up a Small Business Retirement Plan in Pembroke Pines, FL

The particular, financial-based benefits for your Pembroke Pines, FL 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 say that a retirement plan is a "very important" factor in job satisfaction, 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 Pembroke Pines, FL to Assist With My Small Business Retirement Plan?

Opening small business retirement plans is complicated. While the federal government does not currently obligate any employer to offer a retirement plan to workers, some states require businesses of a certain size to have a retirement plan. Pembroke Pines, FL retirement consultants that have spent years helping business owners set up retirement plans are usually needed to not only ensure you and your employees get the most out of your plan, but that you follow evolving tax and business laws.

As your Pembroke Pines, FL retirement plan consultants for your small business, our team will:

• Help you elect which plan works best for you and your employees, and which financial institution should hold the assets
• Assist you in establishing your plan, including creating a document that complies with IRS code, establishing a trust for plan assets, helping employees understand how specific of the plan apply to their retirement, and creating 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 it can serve as a component to their continued financial health

Correct Capital's Pembroke Pines, FL advisors hold ourselves to the fiduciary standard, meaning we are legally and ethically obligated to do what's best for you and your employees. 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

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Challenge 1: High Setup and Administrative Costs

Many small businesses are reluctant 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 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 documentation, compliance, and record-keeping tasks. Providers offer comprehensive administrative support, including payroll processing and fiduciary responsibilities.
• Multiple Employer Plans (MEPs): Enrolling 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

Limited employee involvement 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. Our team 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. Adjust the plan as necessary to align with changes in your business environment and workforce demographics.

With the help of dedicated Pembroke Pines, FL 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 Pembroke Pines, FL include:

• High-Net-Worth Wealth Management
• Retirement Planner
• Financial Planning
• Retirement Plan Consultants
• Fiduciary Financial Advisor

Small Business Retirement Plans in Pembroke Pines, FL | Correct Capital

Owning a small business comes with a plethora of moving parts and 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 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