Newsletters

Retirement Plans for Small Businesses

By December 1, 2013March 1st, 2014No Comments

Within certain guidelines, employers are generally allowed to auto-enroll workers in employer-sponsored retirement plans and divert a set percentage of compensation into workers’ accounts unless they specifically opt out or change the contribution rate. Automatic enrollment tends to boost participation; in fact, average participation for company plans with auto enrollment exceeds 85%, compared with 67% for plans without it.1

Thus, auto enrollment could make it more likely that a plan will pass the IRS nondiscrimination testing ordinarily required for traditional 401(k) plans. Auto enrollment can be added to any new or existing plan that allows elective salary deferrals, including 401(k)s and SIMPLE IRAs utilized by small businesses.

Comparing the benefits and limitations of various retirement plans may help you determine whether one of them might meet your company’s needs.

13125_chart

Safe Harbor 401(k) Plan

“Safe harbor” plans designed for smaller firms are typically more flexible than traditional 401(k)s offered by many large companies. Owners may be able to make larger contributions for themselves (as employee and employer) in exchange for making tax-deductible contributions or “matches” for employees.

The maximum employee contribution in 2013 and 2014 is $17,500 ($23,000 for those 50 and older). Employers must either match employee contributions — 100% of the first 3% of deferred salary plus 50% of the next 2% of deferred salary — or make a non-elective contribution of 3% of salary for each eligible employee. Match, profit share, and/or total contributions cannot exceed 100% of an employee’s compensation or $52,000 in 2014.

SIMPLE IRA

Companies with 100 or fewer employees may use a SIMPLE IRA salary-reduction plan, which requires little or no paperwork, if they do not currently have another retirement plan in place. The maximum employee contribution in 2013 and 2014 is $12,000 ($14,500 for those aged 50 and older). The required match is 100% of the first 3% of participant contributions or 2% of all eligible employee salaries.

Employer-sponsored retirement plan distributions are taxed as ordinary income. Withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty. Early withdrawals (prior to age 59½) from a SIMPLE IRA during the first two years of participation may be subject to a 25% penalty (10% thereafter).

1) MarketWatch, March 15, 2013

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2014 Emerald Connect, LLC
© Mahoney Asset Management

INVESTING RISK DISCLOSURE
Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Before investing, consider the funds’ investment objectives, risks, charges, and expenses. Contact Mahoney Asset Management for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

IMPORTANT CONSUMER INFORMATION
This web site has been prepared solely for informational purposes. It is not an offer to buy or sell any security; nor is it a solicitation of an offer to buy or sell any security.This site and the opinions and information therein are based on sources which we believe to be dependable, but we can not guarantee the accuracy of such information.

Representatives of a broker-dealer or investment adviser may only conduct business in a state if the representatives and the broker-dealer or investment adviser they represent: (a) satisfy the qualification requirements of, and are approved to do business by, the state; or (b) are excluded or exempted from the state’s licenser requirements.

An investor may obtain information concerning a broker-dealer, an investment advisor, or a representative of a broker-dealer or an investment advisor, including their licenser status and disciplinary history, by contacting the investor’s state securities law administrator.

SECURITIES: ARE NOT FDIC-INSURED/ARE NOT BANK-GUARANTEED/MAY LOSE VALUE
This information is intended for use only by residents of CA, CT, DC, FL,, MA, MD, MN, NC, NJ, NY, OH, PA, and VA. Securities-related services may not be provided to individuals residing in any state not listed above.

The financial calculator results shown represent analysis and estimates based on the assumptions you have provided, but they do not reflect all relevant elements of your personal situation. The actual effects of your financial decisions may vary significantly from these estimates–so these estimates should not be regarded as predictions, advice, or recommendations. Mahoney Asset Managment does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences.

Securities offered through
Newbridge Securities Corporation,
member FINRA / SIPC

Investment Advisory Services offered through
Newbridge Financial Services Group Inc.,
an SEC Registered Investment Adviser.

Office of Supervisory Jurisdiction
5200 Town Center Circle, Tower One, Suite 306
Boca Raton, FL 33486

Toll-Free: 877-447-9625
Phone: 954-334-3450
Fax: 954-489-2390