At a time of such uncertainty the importance of finding the fine balance between cutting costs and looking after valuable employees is highlighted.

The recent pandemic has forced many people to reconsider their priorities, and the attitude of working into the grave is quickly becoming a thing of the past. Investing in tailored retirement plans for your staff can ensure that your key staff will continue working with you.

Retirement Plans

Depending on your type of business, there are many different kinds of workplace retirement plans you can consider for your employees, or for yourself.

401k Plan

Probably the most well-known retirement plan in the United States, the 401k retirement plan is funded by the employee’s own income pre-tax, and tax is then deducted (unless the employee is over the age of 59 ½).

The 401k is best suited for new companies looking to attract and retain new staff, startup companies, manufacturers, retailers, and companies which predominantly hire W2 employees.

Solo 401k Plan

A solo 401k is a 401k plan designed for a business owner with no employees, the owner can make contributions as both the employer and employee, and this allows a higher retirement contribution and allows for maximising business deductions.

The self-employed 401k is, as the name suggests, best for self-employed business people or independent contractors.

403b Plan

The 403b plans are incredibly similar to a 401k but also allows employees to contribute on a Roth after-tax basis.

This plan can only be sponsored by academic institutions, non profits, and 501(c)(3) tax-exempt organizations.

Profit Sharing Plan

Profit sharing programs allow employers to make discretionary contributions to their employees retirement plans, although there is no obligation for the company to do so. There are a number of ways that employers can allocate contributions, combined with various options, which can be used to maximize tax deductible contributions and match their appropriate goals and objectives.

A profit sharing plan is more suited towards professional practices, manufacturers, and retailers looking to reward their employees with retirement plan contributions, and owners or executives looking for higher tax deductions.

Defined Benefit Plan

A defined benefit plan is a retirement plan in which the employer guarantees a certain benefit upon retirement, that benefit can either be an exact dollar amount or determined through a calculation which considers such factors as salary and service.

Defined benefit plans are particularly useful to companies with few employees, solo practitioners, professional practices, and companies seeking large tax deductions.

Cash Balance Plan

A type of defined benefit plan, a cash balance plan operates like a profit-sharing plan in the way contributions are made, but with the added bonus of accruing interest over time. Each employee on this plan will have a hypothetical account which is managed by an actuary as an accounting function.

This plan is most suitable for owners or partners who are looking to contribute more than $57,000 a year to their retirement plan; companies that (or are willing to) contribute 3-4% to employees; companies which have consistent profit patterns; and partners or owners who are over the age of 40 who are wishing to boost their retirement funds.

Combination Plan

A combination plan allows a company to maximise the annual amount that can be put aside for retirement. Typically combining a 401k profit sharing plan combined with a cash balance plan, certain criteria must be met by the employee and the company to allow this though.

Combination plans are for companies which are looking for tax deductions in excess of $54,000 a year; employers looking to maximise contributions to an employees retirement plan; and also  companies wanting a tax deferred vehicle.

Other Options

Retirement plans are a great incentive for employees, but they’re also an accessible and matchable incentive that competing companies can offer your staff in an attempt to poach them from your company. Many companies these days look at making “golden handcuffs” which are financial incentives to encourage key staff members to stay onboard for as long as possible, and to not defect to the competitors company.

There are also deferred compensation strategies available from most companies which can help with retirement plans, these strategies can be made to benefit both the employer in the future as well as the company in the meantime.

Whether you’re looking for support with retirement plans or deferred compensation plans, there are many companies across the United States which can offer these services. Make sure to do your due diligence when researching which companies are good, and asking for professional recommendations is always wise.