Group Retirement Benefits Your Employees, Your Business & You

While many people think of the 401(K) when they hear “retirement plan,” businesses have numerous factors and options to consider when choosing an employer sponsored retirement plan.

First, let’s consider WHY a business would want to offer a retirement plan for employees?

 

Employee Retention Tool: Employers can utilize a vesting schedule stretching over several years to improve employee longevity. For example, employees may be entitled to 20% of employer contributions after 2 yrs, 40% after 3 yrs, 60% after  4 yrs, 80% after 5 yrs & 100% after 6 yrs.

 

Recruiting Tool: Enhances overall benefits through a retirement plan and matching program attracts new talent and reward existing employees.

 

Tax Deductions: Businesses may deduct any employer matching contributions that are made to employees.

 

Tax Incentives:  New employer sponsored plans receive a tax credit for $250 per non-highly compensated employee (NHCE)*.

 

There are plenty of options; all with unique characteristics and benefits. It is important to choose the one that best suits your organization’s needs. Start with your goals and work backwards. Are you trying to attract employees, save as much as possible for retirement before exiting, or shelter business income from taxes? Let us help you choose and design a plan tailored to your needs.

 



Overview of Qualified Retirement Plan Options

Plan Types Eligibility 2021 Contribution Limits Employer Matching Vesting Period
401(k) Any Employer $19,500 Yes Plan Determined
403(b) Public Education & Non-Profits $19,500 Yes Plan Determined
Simple IRA Less than 100 Employees $13,500 Yes 100% Immediate
SEP IRA Any Employer 25% of wages
up to $58,000
No – Employer Makes Contributions 100% Immediate
457(b) Government & Tax Exempt Entities $19,500 Yes Plan Determined
Defined Benefit Any Employer $230,000 Employer Makes Contributions Plan Determined




*Those who make less than $130,000 and are not a 5% owner or greater at any point in the plan year.


Greenwood Capital is an SEC registered investment advisory firm. This material has been prepared for information purposes only, and is not intended to provide, and should not be relied on solely for tax, legal or accounting advice.

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