Retain and Reward Employees with a SIMPLE IRA: Easy Retirement Solutions for Oregon Employers
Retain and Reward Employees with a SIMPLE IRA: Easy Retirement Solutions for Oregon Employers
A low-cost alternative to the 401k with less complexity
Finding and hiring great people can be the hardest thing to do for a business owner. It can make or break your business. A SIMPLE IRA can show that you care more for your staff and committed to them and their future. You can offer a retirement benefit without administrative burden, high costs, and compliance requirements that come with a 401k.
Unlike a 401k, a SIMPLE IRA (Savings Incentive Match Plan for Employees) is a low cost and easy plan to set up for your employees. It doesn’t require an annual Form 5500, annual testing, complex administration, or ongoing filings. The SIMPLE has one form for each employee that you keep on file, and one payment is made for your entire staff. For employees that don’t want to participate, still keep the form that states they are opting out. After that, automation takes over, and you check in with your advisor annually to make sure you don’t want to make any changes. A SIMPLE can be a practical first step before committing to a 401k.
Employees can gain a lot from having an IRA set up. Not only do they know that you are committed to them and their future, but it can enhance other areas of their life. Financial literacy and good financial habits are hard to develop. Now you are giving your employees direct access to an professional guidance that not only manages their retirement account but also supports better financial habits overall. Employees who feel more confident financially can be more engaged, less stressed, and more likely to stay long-term.
As an employer, you also have a ton of benefits outside of easy set-up. All contributions are tax deductible which lowers your taxable income each year. Contributions are not subject to Social Security, Medicare, and FUTA (Federal Unemployment Tax Act) taxes. This is a more cost-effective than raises or bonuses, which are fully subject to payroll taxes.
The owner can also make contributions both as an employer and employee to their own retirement savings. With meaningful contribution limits for owners, both the employees and the employer can maximize their savings and reduce their taxable income. This incentivizes everyone to get closer to their savings goals in an account that encourages you to keep your money in the account.
If you are considering a 401k but found it too expensive or complicated, a SIMPLE IRA may be the right answer for your business. If you want a one-pager with more details or want to talk through if a SIMPLE is right for your business, email me at nelson@talluscapital.com and we will send that over to you.
Next month we will discuss the differences between a SIMPLE IRA and OregonSaves.
Tallus Capital Management and LPL Financial do not provide legal advice or tax services. Please consult your legal advisor or tax advisor regarding your specific situation.
