Small Business Retirement Plans in Shreveport, LA

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Small Business Retirement Plans in Shreveport, LA. Offering a retirement plan to your Shreveport, LA employees is a great way to retain talent, incentivize higher performance, and get those much-needed tax reductions. While the benefits may be clear, the complexities of opening and maintaining small business retirement plans are not. What type of plan is best for your business? What are the different laws I'll have to follow? What do I do when I want to change plans, or if I'm closing my business? Correct Capital's team of Shreveport, LA financial planners is committed to helping business owners and their employees reap the benefits of having a sound retirement plans and navigate the ins-and-outs of federal regulations. Whether you already have a plan and want insight as to how it's performing or are looking to create an entirely new one, 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 Shreveport, LA?

The federal government and various financial custodians offer numerous retirement plans and accounts for small business owners and their employees in preparation for retirement. Among the most common are:


SEP-IRA

This variant 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-deferred. Employers can deduct contributions they make on behalf of their employees. Only employers make contributions, which are adjustable and can vary from year to year. Additionally, the contributions are tax-deductible.

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 suitable as employers are not obligated to contribute annually.
  • Simple Administration: The plan requires minimal paperwork and does not require annual filings with the IRS except for regular tax filings.

Setting Up a SEP-IRA

  • Select a Financial Institution: Choose an institution to hold SEP IRA assets, like a bank, brokerage firm, or credit union. Alternatively, opt for a virtual financial institution.
  • Execute a Written Agreement: Establish a written agreement and communicate with eligible employees of the SEP IRA plan.
  • Make Contributions: Based on business performance, contributions can be made by an established percentage of each employee’s compensation or contribute based on a variable percentage.
  • Maintain Records: Maintaining records involves keeping comprehensive records of all contributions made to employee accounts, including dates of contribution and sums. Additionally, ensure records are organized and easily accessible for review 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 fund their own accounts through salary deferrals, and employers can also contribute. This plan is affordable 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 annual filing requirements for employers. This makes them perfect for small businesses with restricted administrative resources.
  • Employer Contributions: Employers are required to make contributions, either by matching employee contributions up to 3% of their salary or making a non-elective contribution of 2% of each eligible employee’s salary.
  • Employee Contributions: Employees can contribute up to $16,000 in 2024, with an additional catch-up contribution of $3,500 for those aged 50 and older.
  • Immediate Vesting: All contributions to the SIMPLE IRA are 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 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 employee contributions or make non-elective contributions, and ensure these are made timely.

Personal Defined Benefit Plan

This plan is specifically for owner-only 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 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 $275,000 annually (in the current year) depending on age, income, and the desired retirement benefit.
  • Predictable Retirement Benefits: The plan promises a specific benefit at retirement, providing more predictability for retirement planning compared to defined contribution plans like 401k accounts.
  • Tax Advantages: Contributions are tax-deductible, reducing current taxable income. The investments grow tax-deferred until distribution.

Setting Up a Personal Defined Benefit Plan

  • Consult with a Plan Provider: Work with a 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 benefit formulas and contribution requirements.
  • Actuarial Calculations: Have a financial analyst calculate the necessary contributions to meet the promised benefits, ensuring compliance with 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: Ensure compliance by filing IRS Form 5500 annually to report on the plan’s status.
  • Permanence: A defined benefit plan should be maintained for at least five years. Quickly terminated plans often serve as signals and may attract regulatory scrutiny.

401(k) Plans

401(k)s are available to firms of any size, and are highly flexible. Employees may defer 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 pre-tax, reducing the employee’s taxable income. Alternatively, contributions can be made post-tax (Roth). 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 $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 financial emergencies.

Setting Up a 401(k) Plan

  • Choose a Plan Provider: Pick a provider that offers various investment options, management assistance, and employee learning resources.
  • 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: Develop a meticulous record system 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)

Also known as a i401(k), this plan is designed to offer the same benefits as a traditional 401(k), but 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 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. Search for providers with multiple investment options and minimal fees.
  • Create a Plan Document: Prepare 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 $$250k, you must file IRS Form 5500 annually. Maintain precise records of all contributions and transactions.

Profit Sharing Plans

A Profit Sharing Plan is a type of retirement plan where employers can make discretionary contributions to employee retirement accounts, determined by the company's profits. These plans are intended to share the company’s success with its employees and encourage them to contribute to the company’s profitability.

Benefits of a Profit Sharing Plan

  • Flexibility in Contributions: Employers can decide each year how much to contribute based on the company's profitability. This makes it an versatile option for businesses with fluctuating 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 increase employee morale and loyalty, as employees directly benefit from the company’s success.
  • High Contribution Limits: Employers can contribute up to the lesser of 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: Select a bank 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: Yearly 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 primarily invests in the employer's stock. ESOPs provide 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 offer employees with an partial ownership in the company, which can enhance incentive 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 profit from the growth in the value of the company’s stock, granting 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 steadily take the lead as previous owners move into retirement.

Setting Up an ESOP

  • Feasibility Study: Perform 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 facilitate 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: Educate employees about the ESOP, how it works, and the advantages they can expect.
  • Compliance and Reporting: File necessary documents with the IRS and the Department of Labor, including Form 5500, to keep your plan compliant.

Multiple Employer Plans (MEPs)

A Multiple Employer Plan (MEP) is a type of retirement plan that allows multiple, unrelated employers to participate in a single retirement plan and achieve economies of scale. MEPs are designed to provide small businesses with a cost-effective and administratively efficient way to offer retirement benefits to their employees.

Benefits of an MEP

  • Cost Savings: By pooling resources with other employers, businesses can decrease 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 facilitate 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: Small companies lacking resources to provide a retirement plan on their own can provide competitive retirement benefits through an MEP., helping to attract and retain talented employees and create 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 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 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 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 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 Shreveport, LA

The particular, financial-based benefits for your Shreveport, LA 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. Three out of five employees say that a retirement plan is a "very important" factor in how good they feel at their present employment, while employers reap the benefits both during tax season and in office productivity. Below are some of the main benefits for both businesses and employees of establishing a small business retirement plan:


Employee Benefits

  • Better confidence in their retirement planning
  • Reduced taxable income
  • Contributions are simple with payroll deductions
  • Contributions and investment gains are not taxed until distributed
  • As interest accrues, small savings 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 your best employees
  • Promote great work ethic
  • Employer contributions are tax-deductible
  • Flexible plan options to fit your plan to your needs
  • Tax credits upon initial set-up

Why Should I Consult With a Financial Advisor in Shreveport, LA 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 Shreveport, LA bank. While the federal government does not currently obligate any employer to offer a retirement plan to employees, some states require businesses with a minimum number of employees to offer access to a retirement plan. Shreveport, LA retirement consultants that are experienced in helping business owners set up retirement plans are usually needed to not only make sure you get the benefits you're looking for, but that you abide by ever-changing tax and business laws.

As your Shreveport, LA retirement plan consultants for your small business, our team will:

  • Help you decide which plan works best for you and your employees, and which financial institution should house the assets
  • Assist you in establishing your plan, including adopting a written plan, establishing a trust for plan assets, helping employees understand how specific of the plan apply to their savings, and creating a record keeping system
  • Help you operate your plan by staying compliant with relevant laws, managing the plan's assets, and distributing benefits
  • Help educate your employees on your plan, its benefits, and how they can use it as a important aspect of their continued financial health

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

Common Challenges and Solutions in Small Business Retirement Plans


Challenge 1: High Setup and Administrative Costs

Many small businesses hesitate to set up retirement plans due to the expected 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, plus 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 management.
  • Multiple Employer Plans (MEPs): Being part of 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: 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.

Problem 4: Adhering to Regulations

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

With the help of dedicated Shreveport, LA 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 Shreveport, LA include:

Small Business Retirement Plans Shreveport, LA | Financial Advisors | Retirement Consultants Near Shreveport

Small Business Retirement Plans in Shreveport, LA | Correct Capital

Operating a small business involves 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* across the United States. To set up a retirement plan for your small business, or learn what we can do for 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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