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BBB Midwest Plains: 9 things to know about company retirement options
![Company retirement options webinar](https://m.bbb.org/prod/corecmsimages/2024/c87145de-ec27-4b37-b1ba-5239fb34a083.jpg?tx=w_763)
(BBB Midwest Plains)
Better Business Bureau (BBB) of the Midwest Plains recently hosted a webinar featuring Stacy Gutschenritter, Vice President & Development Office at Union Bank & Trust, about the various retirement plan options available for businesses and employees.
Here are the nine key takeaways from the event.
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Understanding the importance of retirement plans
- Retirement plans are crucial for both business owners and employees. They not only help employees prepare for a financially secure future but also demonstrate the employer's investment in their workforce.
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Simple IRA: A starter plan for small businesses
- Eligibility: Businesses with 100 or fewer employees can participate.
- Contributions: Both employees and employers contribute. Employees can defer up to $16,000 per year, with an additional $3,500 catch-up contribution for those over 50. Employers can match contributions dollar-for-dollar up to 3% of compensation or make a non-elective contribution of 2%.
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Traditional 401(k): Flexible for any business size
- Eligibility: Open to any business, including non-profits.
- Contributions: Employees can defer up to $23,000 per year, plus a $7,500 catch-up contribution for those over 50. Employers can contribute up to 25% of the total eligible payroll.
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Safe Harbor 401(k): Simplified compliance
- Benefits: Eliminates annual testing requirements and vesting schedules, allowing highly compensated employees to maximize deferrals.
- Employer contributions: Options include a basic match, enhanced match, or non-elective contribution, all of which must be 100% vested.
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Tax benefits for employers and employees
- Employer contributions are tax-deductible, reducing federal taxable income. Employees benefit from pre-tax or Roth contributions, providing tax advantages based on their chosen deferral method.
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Investment options and flexibility
- Retirement plans typically offer a range of mutual funds, allowing employees to tailor their investments to their financial goals. Participants can change their investment allocations at any time.
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Transitioning between plans
- Employees can roll over funds from one retirement plan to another without penalties, provided the new plan allows it. This flexibility helps employees consolidate their retirement savings.
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Why offer a retirement plan?
- Retirement plans attract and retain talent, showing employees that their future is valued. They also help bridge the gap left by Social Security, ensuring a better quality of life in retirement.
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Consultation and next steps
- Businesses are encouraged to consult with financial advisors and tax professionals to choose the best retirement plan. Starting with a Simple IRA and transitioning to a 401(k) as the business grows is a common strategy.
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Additional Resources
Central Ohio BBB Business Podcast