Now's the time to set up a new retirement plan or make changes to your existing plan. Here's how to make sure everyone gets the most value from your choice of retirement plan options.
For small business owners, making the decision to offer your employees a retirement savings plan can be intimidating. Which type of plan is best for my company? How much will it cost? How much time will it take to set up?
Including a retirement plan in your benefits package is quickly becoming a must-have if you want to stay competitive. The latest research from the Society for Human Resource Management (SHRM) found that 82 percent of employees say retirement savings is an important benefit — that's up 27 percent from 2021.
The Safe Harbor 401(k) plan checks a lot of boxes
There's no lack of choices when it comes to retirement plans — from IRAs and Roth 401(k)s to SIMPLE and SEP plans. But not all are inexpensive to establish and easy to maintain.
That's where a Safe Harbor 401(k) can be ideal for small business owners looking for maximum benefits. This type of plan is simply a 401(k) with a mandatory employer contribution and vesting requirement. In exchange for required contributions, you can forgo annual nondiscrimination testing, which helps reduce your duties as a plan administrator.
But Safe Harbor plans offer more benefits than just reduced paperwork. Did you know that more than a third of small business owners have no retirement savings? A Safe Harbor plan makes it easy to save for your own retirement while you're helping your employees become retirement ready.
As the business owner, you can contribute up to $20,500 tax deferred, which lowers your personal tax liability. In addition, the employer matching contribution you provide for employees is a tax deduction.
Understanding Safe Harbor plan deadlines
Though businesses have until October 1 to implement a Safe Harbor plan, you must begin the process no later than September 16. Missing that deadline means you'll have to wait a full year to start reaping the benefits of sponsoring a Safe Harbor 401(k) retirement plan.
If you currently offer a retirement plan, depending on the type of plan, you may be able to convert it to a Safe Harbor 401(k) to take advantage of the full benefits it offers employers.
The ADP Retirement Services team has educated thousands of small business owners to make more informed decisions when choosing the best retirement plan for their needs. We've also helped them start building their own retirement readiness. Let us know if we can do the same for you.
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BLOG DISCLOSURE – ADP Provided:
Registered representative of ADP Broker Dealer, Inc. (ADP BD), Member FINRA, an affiliate of ADP, Inc., One ADP Blvd, Roseland, NJ 07068 and Associated person of ADP Strategic Plan Services, LLC (SPS) an SEC Registered Investment Adviser. Registration does not imply a certain level of skill or services.
ADP, Inc., and its affiliates do not offer investment, tax, or legal advice to individuals. Nothing contained in this article is intended to be, nor should be construed as, particularized advice or a recommendation or suggestion that you take or not take a particular action. Questions about how laws, regulations, guidance, your plan's provisions, or services available to participants may apply to you should be directed to your plan administrator or legal, tax or financial advisor. ADPRS-20220816-3528
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