Small Business Retirement Plans in Syracuse, NY

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Small Business Retirement Plans in Syracuse, NY. Starting up a retirement plan for you and your Syracuse, NY 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 difficulties 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 retiring and my business will no longer be running? Correct Capital's team of Syracuse, NY 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 complexity of financial law. Whether you're interested in modifying an existing plan 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 online.



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What Types of Retirement Plans Are Available to Small Businesses in Syracuse, NY?

Small business owners and their employees are offered retirement plans through the federal government and various financial custodians to better prepare for retirement. Among the most common are:


SEP-IRA

This kind of individual retirement account is available to owner-only businesses, freelancers, and businesses with very few employees. It follows the identical 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 flexible and can vary from year to year. Additionally, the contributions are deductible from taxes.

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: This plan does not require employers to contribute every year, which is suitable for businesses with variable profits.
  • Simple Administration: With this plan, there is minimal paperwork and no need for yearly filings with the IRS beyond regular tax filings.

Setting Up a SEP-IRA

  • Select a Financial Institution: Choose a provider to hold SEP IRA assets, like a bank, brokerage firm, or credit union. Alternatively, opt for a virtual financial institution.
  • Execute a Written Agreement: To establish the SEP IRA plan, create a contractual arrangement and advise eligible employees.
  • Make Contributions: Based on business performance, contributions can be made by a fixed percentage of each employee’s compensation or make payments based on a range of percentages.
  • Maintain Records: Maintaining records involves keeping thorough records of all contributions made to employee accounts, including dates of contribution and sums. Additionally, ensure records are neatly arranged and easily accessible for inspection purposes.

SIMPLE IRA

"SIMPLE" stands for "Savings Investment Match Plan for Employees," and these IRAs are for businesses with a maximum of 100 employees. Employees can make contributions to their own accounts through deductions from their salaries, and employers can also contribute. This plan is affordable as it's mainly funded by employees, and their contributions can be eligible for tax deduction.

Benefits of a SIMPLE IRA

  • Ease of Setup and Administration: SIMPLE IRAs are straightforward to establish and maintain, with no need for yearly filings for employers. This makes them perfect for small businesses with limited administrative resources.
  • Employer Contributions: Employers are required to make contributions, by either matching employee contributions up to 3% of their salary or making a non-elective contribution of 2% of each eligible employee’s salary.
  • Employee Contributions: Employees can contribute up to $16,000 in 2024, with an extra catch-up contribution of $3,500 for those aged 50 and older.
  • Immediate Vesting: All contributions to the SIMPLE IRA are promptly 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 financial institution, investment fund, or brokerage firm to hold the SIMPLE IRA assets.
  • Execute a Written Agreement: Use IRS Form 5304-SIMPLE or 5305-SIMPLE to create a written agreement outlining the terms of the plan.
  • Employee Notification: Notify eligible employees about the plan, including details on how to participate and the benefits provided.
  • Employee Enrollment: Assist employees in setting up 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 promptly.

Personal Defined Benefit Plan

This plan is solely for sole proprietor businesses, or those with as many as 5 employees. With this plan, you target a desired level of retirement income, and contribution limits are adjusted each year based on that, with a maximum limit set each year. While this plan is highly customizable and allows for significant contributions, there may be 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 $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 401k accounts.
  • Tax Advantages: Contributions are tax-deductible, reducing current taxable income. The investments grow tax-free 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 written plan that details the terms of the plan, including benefit formulas and contribution requirements.
  • Actuarial Calculations: Have a financial analyst calculate the necessary contributions to meet the promised benefits, per IRS requirements.
  • Annual Administration: 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: To report on the plan’s status and compliance, file IRS Form 5500 annually.
  • Permanence: A defined benefit plan needs to be in place for 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 adaptable. 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: To reduce the employee’s taxable income, contributions are made pre-tax. Alternatively, contributions can be made post-tax (Roth). Investments grow without immediate tax.
  • Employer Matching: Many employers offer contribution matching, 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: Pick a provider that offers various investment options, administrative support, and employee education.
  • Create a Plan Document: Prepare 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: 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 Solo 401(k), this plan is designed to offer the same benefits as a traditional 401(k), but for individuals who are sole proprietors, or whose only employee is their spouse. Each year, you can contribute up to the annual 401(k) limit, and the employer may make a additional contribution up to 25% of compensation or, if self-employed, an amount considering your earned income and deducting half of self-employment tax paid and contributions made by you during the year. Another advantage of individual 401(k)s is that you can opt to open a Roth 401(k) account, or roll over pre-tax assets.

Setting Up an Individual 401(k)

  • Choose a Plan Provider: Choose a financial institution or brokerage that offers Individual 401(k) plans. Search for providers with multiple investment options and reduced fees.
  • Create a Plan Document: Create 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 filling out an application and providing necessary documentation.
  • Make Contributions: Determine your contribution amounts for the year and make regular contributions. Ensure you stay within the IRS limits for total contributions.
  • Compliance and Reporting: If your plan assets exceed $250,000, you must file IRS Form 5500 annually. 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 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 contribute to 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 tax-deferred, 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 $66,000 for the current year, making it a advantageous 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: 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: Yearly decide the amount to contribute based on company profits and the predetermined formula.
  • File Necessary Forms: File IRS Form 5500 every 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 a stake in the company, aligning their interests with the business's success, and potentially preparing the business's future generation of leadership.

Benefits of an ESOP

  • Employee Ownership: ESOPs offer employees with an ownership stake in the company, which can heighten motivation and commitment.
  • 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, offering potentially considerable retirement savings.
  • Succession Planning: ESOPs can be an effective strategy for business succession, allowing owners to sell their shares to high-performing employees, who can slowly 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 viable option for your company.
  • Hire ESOP Advisors: Retain financial, legal, and ESOP advisors to aid in the setup process.
  • Create a Plan Document: Write a plan document that specifies the terms of the ESOP, including how shares will be assigned and vested.
  • Establish a Trust: Establish 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 advantages they can expect.
  • Compliance and Reporting: Submit 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 affordable 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 cut 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 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 businesses that might not have the resources to offer a retirement plan on their own can provide competitive retirement benefits through an MEP, which can help 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, diminishing 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 completing 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, submitting required documents, and managing plan assets.

There are advantages and disadvantages 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 benefits, 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 Syracuse, NY

The specific, financial-based benefits for your Syracuse, NY small business retirement plan will largely be based on the specific plan you choose. However, a small business retirement plan, whichever one you choose, has universal benefits. Over half 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 setting up a small business retirement plan:


Employee Benefits

  • Improved financial security in retirement
  • Tax deductions
  • Contributions are simple with payroll deductions
  • Contributions and investment gains are not taxed until distributed
  • Over the years small contributions grow into significant sums of money
  • Ability to conduct a 401(k) rollover if it's beneficial down the road

Business Benefits

  • Attract, recruit, and retain your best employees
  • Incentivize based on performance-based employer contributions
  • Employer contributions are tax-deductible
  • Highly customized plans are available
  • Tax credits upon initial set-up

Why Should I Consult With a Financial Advisor in Syracuse, NY to Assist With My Small Business Retirement Plan?

Setting up small business retirement plans is far different from setting up a personal savings plan at your local Syracuse, NY bank. While the federal government does not currently obligate any company to offer a retirement plan to employees, some states require businesses of a certain size to offer access to a retirement plan. Syracuse, NY 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 abide by frequently chancing tax and business laws.

As your Syracuse, NY retirement plan consultants for your small business, our financial planners will:

  • Help you decide the "right" plan for you, and the right custodian to hold plan 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 the plan's terms, and developing 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 it can serve as a part of their ongoing financial success

Correct Capital's Syracuse, NY financial planners are fiduciary advisors, meaning we are obligated, by law and by ethics to do what's best for you and your employees. As an independent firm, we have the freedom and flexibility to tailor our offerings to best suit the goals of our clients. 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 documentation, compliance, and record-keeping tasks. Providers offer comprehensive administrative support, including integration with payroll and fiduciary services.
  • 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: 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 increase participation and savings rates.
  • Employee Education: Providing regular education and communication about the benefits of the retirement plan can help increase employee engagement. Host workshops, seminars, and one-on-one meetings to ensure employees understand how the plan works and the importance of saving for retirement. Correct Capital offers employee education, including one-on-one meetings and quarterly webinars, if you choose us as your retirement plan advisors.

Challenge 4: Compliance with Regulations

Managing 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: Select retirement plans that offer flexibility in contributions. SEP IRAs, for example, allow employers to decide each year how much to contribute based on the company’s profitability, making it a suitable option for businesses with variable income.
  • Regular Plan Reviews: Conduct regular reviews of your retirement plan to ensure it continues to meet the needs of your business and employees. Adjust the plan as necessary to align with changes in your business environment and workforce demographics.

With the help of dedicated Syracuse, NY 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 Syracuse, NY include:

Small Business Retirement Plans Syracuse, NY | Financial Advisors | Retirement Consultants Near Syracuse

Small Business Retirement Plans in Syracuse, NY | Correct Capital

Operating a small business involves countless daily, monthly, and annual tasks to ensure things run smoothly — setting up and maintaining a small business retirement plan doesn't have to be one of them. Correct Capital currently manages over 37 plans in both small and large companies, and represents over $212 million in total plan assets* nationwide. 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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