Benefits for the Employer & Employee
As an employer, you may want to establish one or more retirement plans for yourself and/or your employees. Having a plan can provide significant benefits for both you and your employees (if any). There are many different types of retirement plans, however, and choosing the right one for your situation is a critical decision. You want a plan that will meet both your goals as the employer
and the needs of any employees you may have. In addition, it is important to balance the cost of establishing and maintaining a plan against the potential benefits.
Individual 401(k)s
An individual 401(k) plan, also known as a Solo 401(k), is really nothing more than a combined profit-sharing plan and 401(k) plan implemented by a self-employed individual or small business owner with no full-time employees (unless the full-time employee is the owner's spouse). These plans, which went into effect after passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 (2001 Tax Act), can allow for significant tax-deferred contributions.
SEP IRA Plans
A Simplified Employee Pension (SEP) is a written plan
that allows small-business owners to make retirement
contributions to traditional IRAs (SEP-IRAs) set up for
themselves and for each eligible employee. These
contributions may be deducted from your business's
income and excluded from your employees' income.
A SEP may not only provide you a tax-advantaged way to save for your own retirement, but may also help you attract and retain qualified employees by providing for their retirements.
SIMPLE IRA Plans
The Savings Incentive Match Plan for Employees of Small Employers, SIMPLE IRA Plans are both easy and inexpensive to administer.
You promise to match employee contributions dollar for dollar up to 3% of pay, or to make a "nonelective" contribution for all eligible employees, whether or not they contribute, equal to 2% of pay.