Small Business Retirement Plans in Reno, NV

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Small Business Retirement Plans in Reno, NV. Setting up a retirement plan for you and your Reno, NV employees offers a variety of benefits, including tax reductions and a great way to attract and retain talent. While the benefits may be clear, the difficulties of establishing and maintaining small business retirement plans are not. What benefits do different kinds of plans provide? What federal regulations do I have to follow? What do I do when a new plan seems like a better option, or if I'm closing my business? Correct Capital's team of Reno, NV financial planners is committed to helping business owners and their employees get the most out of having a sound retirement plans and understanding the complexity of federal regulations. For anything from initial setup and employee education to making annual adjustments, speak to a financial advisor at Correct Capital today at 314-930-401K or contact us through our website.



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What Types of Retirement Plans Are Available to Small Businesses in Reno, NV?

The federal government provides a variety of savings plans 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 sole proprietor 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 without taxes. Employers can deduct contributions they make on behalf of their employees. Only employers make contributions, which are modifiable and can vary annually. 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: For businesses with changing profits, this plan is ideal as employers are not obligated to contribute annually.
  • Simple Administration: With this plan, there is minimal paperwork and no requirement for annual filings with the IRS beyond regular tax filings.

Setting Up a SEP-IRA

  • Select a Financial Institution: Choose an institution to hold SEP IRA assets, such as a bank, brokerage firm, or credit union. Alternatively, opt for a digital financial institution.
  • Execute a Written Agreement: Establish a contractual arrangement and advise eligible employees of the SEP IRA plan.
  • Make Contributions: Contributions can be made by calculating a set percentage of each employee’s compensation. Alternatively, contribute based on a range of percentages determined by business earnings.
  • Maintain Records: Keep comprehensive records of all contributions made to employee accounts, including time stamps and figures. 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 up to 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 eligible for tax deduction.

Benefits of a SIMPLE IRA

  • Ease of Setup and Administration: SIMPLE IRAs are simple to establish and maintain, with no need for yearly filings for employers. This makes them ideal 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 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 promptly.

Personal Defined Benefit Plan

This plan is solely for owner-only 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 beginning expenditures and yearly charges 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 $two hundred seventy-five thousand dollars 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 bank or retirement plan provider that has experience with 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: 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 needs to be in place for five years. Plans established that are quickly terminated are often signals and open to regulatory scrutiny.

401(k) Plans

401(k)s are available to businesses of any size, and are highly customizable. 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:

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-free until withdrawn.
  • 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 $twenty-three thousand dollars, 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 financial emergencies.

Setting Up a 401(k) Plan

  • Choose a Plan Provider: Select a provider that offers a range of investment options, management assistance, and staff training.
  • Create a Plan Document: Outline 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 employees.
  • 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 updates in a timely manner.

Individual 401(k)

Designed to offer the same benefits as a company 401(k), this plan is also known as a Individual 401(k). It is ideal 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 benefit of individual 401(k)s is the ability 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 a range of investment options and minimal 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 $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 optional 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 enhance 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 flexible option for businesses with changing 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 $$66k for this year, making it a generous 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: Prepare a plan document outlining the profit-sharing formula, eligibility requirements, and vesting schedule.
  • Communicate with Employees: Inform 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 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 primarily invests in the employer's stock. ESOPs grant 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 equity share in the company, which can improve incentive and dedication.
  • Tax Benefits for the Company: Contributions to the ESOP are eligible for tax deduction, and the company can also receive tax benefits pertaining to the sale of stock to the ESOP.
  • Retirement Savings for Employees: Employees profit from the growth in the value of the company’s stock, offering potentially significant retirement savings.
  • Succession Planning: ESOPs can be an effective strategy for business succession, allowing owners to sell their shares to their best employees, who can steadily 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 suitable option for your company.
  • Hire ESOP Advisors: Retain financial, legal, and ESOP advisors to help with the setup process.
  • Create a Plan Document: Develop a plan document that details the terms of the ESOP, including how shares will be allocated and vested.
  • Establish a Trust: Form 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 perks they can expect.
  • Compliance and Reporting: Send in 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 pooling resources with other employers, businesses can lower administrative costs and fees associated with maintaining a retirement plan. This cost-sharing makes MEPs an attractive 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: An MEP allows small businesses that might not have the resources to provide a retirement plan on their own can offer competitive retirement benefits, which can help to attract and retain talented employees and offer 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, reducing 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 a financial institution 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: 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 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 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 Reno, NV

The particular, financial-based advantages to your Reno, NV small business retirement plan is dependent upon which plan you set up. That said, a small business retirement plan, whichever one you choose, has universal benefits. Three out of five employees 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 setting up a small business retirement plan:


Employee Benefits

  • Improved financial security in retirement
  • Reduced taxable income
  • Contributions can be easily made through payroll deductions
  • Contributions and investment gains are not taxed until distributed
  • Over the years small contributions grow into significant sums of money
  • Ability to perform a 401(k) rollover if it's beneficial down the road

Business Benefits

  • Attract, recruit, and retain talent
  • Promote great work ethic
  • Employer contributions are tax-deductible
  • Flexible plan options to fit your plan to your needs
  • Tax credits that can help reduce startup costs

Why Should I Consult With a Financial Advisor in Reno, NV 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 retirement savings options to employees, certain states require businesses of a certain size to offer access to a retirement plan. Reno, NV 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 evolving tax and business laws.

As your Reno, NV retirement plan consultants for your small business, our advisers will:

  • Help you decide the best plan for you, and the right custodian to hold plan assets
  • Assist you in setting up your plan, including adopting a written plan, establishing a trust for plan assets, helping employees understand the plan's terms, and developing a record keeping system
  • Help you operate your plan by keeping up-to-date 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 component to their ongoing financial success

Correct Capital's Reno, NV advisors hold ourselves to the fiduciary standard, meaning we are legally and ethically bound 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


Challenge 1: High Setup and Administrative Costs

Many small businesses are unwilling to set up retirement plans due to the assumed 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 administrative burden 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 integration and fiduciary management.
  • 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

Handling 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 adjust to changing business conditions.

Solution:

  • Flexible Plans: Choose 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 support of dedicated Reno, NV 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 Reno, NV include:

Small Business Retirement Plans Reno, NV | Financial Advisors | Retirement Consultants Near Reno

Small Business Retirement Plans in Reno, NV | Correct Capital

Operating a small business involves a mountain 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* 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 through our website.

*as of March 2024

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