Small Business Retirement Plans in Savannah, GA

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Small Business Retirement Plans in Savannah, GA. Offering a retirement plan to your Savannah, GA employees is a great way to retain talent, boost performance, and get those much-needed tax breaks. While the benefits may be obvious, the complexities of opening and maintaining small business retirement plans are not. What benefits do different kinds of plans provide? What are the different laws that apply to different plans? What do I do when I want to change plans, or if I'm closing my business? Correct Capital's team of Savannah, GA financial planners has over 70 years of combined experience helping business owners and their employees get the most out of having a sound retirement plans and navigate the ins-and-outs of federal regulations. For anything from initial setup and employee education to fine-tuning an existing plan, call 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 Savannah, GA?

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


SEP-IRA

This type 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 without taxes. Employers can deduct contributions they make on behalf of their employees. Only employers make contributions, which are modifiable and can vary 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: For businesses with changing profits, this plan is perfect as employers are not obligated to contribute annually.
  • Simple Administration: With this plan, there is minimal paperwork and no annual filing requirements with the IRS beyond regular tax filings.

Setting Up a SEP-IRA

  • Select a Financial Institution: Choose a company to hold SEP IRA assets, like a bank, brokerage firm, or credit union. Alternatively, opt for an online financial institution.
  • Execute a Written Agreement: Notify eligible employees by establishing a written agreement for the SEP IRA plan.
  • Make Contributions: To make contributions, calculate a predetermined percentage of each employee’s compensation or make payments based on a range of percentages.
  • Maintain Records: Maintaining records involves keeping detailed records of all contributions made to employee accounts, including dates of contribution and amounts. Additionally, ensure records are well-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 inexpensive 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, 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 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 banking establishment, mutual fund, or brokerage firm to hold the SIMPLE IRA assets.
  • Execute a Written Agreement: Use IRS Form 5304-SIMPLE or 5305-SIMPLE to create a written agreement outlining the terms of the plan.
  • Employee Notification: Notify eligible employees about the plan, including information on how to participate and the benefits provided.
  • Employee Enrollment: Assist employees in establishing their accounts and making their contributions.
  • Employer Contributions: Decide whether to match up to employee contributions or make non-elective contributions, and ensure these are made promptly.

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 a yearly cap. While this plan is highly customizable and allows for significant contributions, there may be startup costs and annual fees associated with it.

Benefits of a Personal Defined Benefit Plan

  • High Contribution Limits: Allows for significantly higher contributions compared to other retirement plans, potentially reaching $$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 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 financial institution 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 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: Manage the plan’s investments and ensure that required contributions are made annually. Annual actuarial reviews are necessary 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 at least five years. Plans established that are quickly terminated are often indicators and open to regulatory scrutiny.

401(k) Plans

401(k)s are available to corporations of any size, and are highly tailorable. Employees may postpone 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:

Benefits of a 401(k) Plan

  • Tax Advantages: Contributions are made tax-free initially, 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 2024, 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 unexpected expenses.

Setting Up a 401(k) Plan

  • Choose a Plan Provider: Choose a provider that offers a range of investment options, management assistance, and staff training.
  • Create a Plan Document: Draft 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: Maintain precise 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)

This plan, also known as a Individual 401(k), is designed to provide the same benefits as a business 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 nonelective 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: Select a financial institution or brokerage that offers Individual 401(k) plans. Search for providers with a range of investment options and reduced fees.
  • Create a Plan Document: Establish the terms of your plan, including contribution limits, investment options, and loan provisions.
  • Open an Account: Open 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. Develop a meticulous record system of all contributions and transactions.

Profit Sharing Plans

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

Benefits of a Profit Sharing Plan

  • Flexibility in Contributions: Employers can determine each year how much to contribute based on the company's profitability. This makes it an flexible 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 2024, making it a beneficial 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: Develop a plan document outlining the profit-sharing formula, eligibility requirements, and vesting schedule.
  • Communicate with Employees: Advise 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 each 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 offer employees with an ownership stake in the company, which can boost motivation and loyalty.
  • Tax Benefits for the Company: Contributions to the ESOP are tax-deductible, and the company can also gain tax benefits associated with 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 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 gradually take the lead as previous owners move into retirement.

Setting Up an ESOP

  • Feasibility Study: Execute a feasibility study to determine if an ESOP is a appropriate option for your company.
  • Hire ESOP Advisors: Retain financial, legal, and ESOP advisors to assist with the setup process.
  • Create a Plan Document: Draft a plan document that specifies 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: Update 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 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 appealing option for small businesses looking to save on expenses.
  • Administrative Efficiency: MEPs ease 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 offer a retirement plan on their own to deliver competitive retirement benefits, which helps to attract and retain talented employees and give 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 bank or retirement plan provider to administer the plan.
  • Adopt the Plan: Each participating employer must formally adopt the MEP by completing 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 respected financial advisor like those at Correct Capital will be able to help you determine which plan works best for you and your team.



Benefits of Setting Up a Small Business Retirement Plan in Savannah, GA

The particular, financial-based advantages to your Savannah, GA 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. 60% of employees say that a retirement plan is a "very important" factor in job satisfaction, while employers also get tax breaks and can better attract and motivate employees. Below are some of the main benefits for both businesses and employees of having a small business retirement plan:


Employee Benefits

  • More financial security in retirement
  • Tax deductions
  • Contributions are simple with salary deferral
  • They do not pay taxes on contributions or investments gains until they withdraw them
  • As interest accrues, 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
  • Employer contributions are tax-deductible
  • Highly customized plans are available
  • Tax credits that can help reduce startup costs

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

Opening small business retirement plans is not the same thing as setting up a personal savings plan at your local Savannah, GA bank. While the federal government does not currently require any employer to offer retirement savings options to workers, certain states require businesses with a minimum number of employees to offer access to a retirement plan. Savannah, GA retirement consultants that are experienced in helping business owners create retirement plans are usually needed to not only ensure you and your employees get the most out of your plan, but that you follow frequently chancing tax and business laws.

As your Savannah, GA retirement plan consultants for your small business, our team will:

  • Help you elect the "right" plan for you, and which financial institution should house the assets
  • Assist you in setting up your plan, including creating a document that complies with IRS code, 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 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 continued financial success

Correct Capital's Savannah, GA financial planners are fiduciary advisors, meaning we are obligated, by law and by regulatory oversight to only offer advice based on what we believe is in your best interest. As an independent firm, we have the freedom and flexibility to tailor our offerings to best suit the goals of our clients. Schedule a consultation with a member of our advisor team today.

Common Challenges and Solutions in Small Business Retirement Plans


Challenge 1: High Setup and Administrative Costs

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

Solution:

  • SIMPLE IRA and SEP IRA: These plans have 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, and 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 documentation, compliance, and record-keeping tasks. Providers offer comprehensive administrative support, including payroll integration and fiduciary services.
  • 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: Introducing 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: 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 assistance of dedicated Savannah, GA financial advisors and retirement plan specialists, your business can manage these challenges to create a small business retirement plan that works for both you and your employees.

Other services we offer in Savannah, GA include:

Small Business Retirement Plans Savannah, GA | Financial Advisors | Retirement Consultants Near Savannah

Small Business Retirement Plans in Savannah, GA | 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 doesn't have to be one of them. Correct Capital currently manages over 37 plans for a variety of types of businesses, and represents over $212 million in total plan assets* throughout the country. To set up a retirement plan for your small business, or learn what other services we offer to business owners, call Correct Capital today at 314-930-401K or contact us online.

*as of March 2024

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