So with the general population working more years to make it to retirement, should your small business establish some kind of retirement plan that might benefit both employees and management?

According to Scott Stitt, a Columbus lawyer with the law firm of Tucker Ellis LLP, if an employer is going to establish a retirement plan for their company, it is imperative to choose the right plan. For example, some retirement plans require the employer, who is likely also the plan administrator, to file certain documents with the IRS every year. If a business owner doesn’t want to be bothered with that, they are limited to choosing a SIMPLE IRA, assuming their company meets the plan qualifications and provides contributions to the plan. “If a small employer qualifies for a SIMPLE IRA, employees are allowed to defer money to their IRA and the company makes matching contributions of three percent of compensation,” he says.

According to Stitt, there are several factors to consider when determining which retirement vehicle is right for a small business. They include:

• The number of people employed by the company
• The business owner’s financial situation
• Whether the company owner seeks to roll any investments into the retirement fund
• How complex a plan the company owner wants

But Michael Gorelick, vice president of California-based Benefit Equity, Inc., which, among other things, is a Third Party Administrator and Retirement Plan Consultancy, says another factor is essential when considering what type of retirement plan is right for a small business. “Provisions” are key, he says.
Before Gorelick can advise a small business owner which type of retirement vehicle is appropriate for their company, he asks the owner several questions. For example, Gorelick says it’s essential to decipher the type of company seeking the retirement plan. Is the business a manufacturer? Professional? Comprised primarily of highly compensated employees or a majority of hourly staff? The answers to that inquiry are important because they help determine which provisions are most important for the designing the right plan,” says Gorelick.

However, he says, any business can qualify for retirement planning. “It just needs to be a business entity to qualify for a 401K,” he says.

Business owners enjoy several benefits when they establish and maintain a retirement plan for themselves and their employees, says Gorelick. For example, sustaining a viable retirement vehicle is commonly viewed as an employee retention tool as well as an incentive to new hires to join a certain business. The corporation also enjoys tax deductions, another financial benefit of maintaining the plan.

For further details on limitations on benefits and annual contributions to a retirement vehicle, consult IRS Tax Code,

---

Tami Kamin Meyer is an Ohio attorney and writer.