Did You Know That Small Business Drives Over 95% Of The U.S. Economy And Employs Over 60% Of The Workforce, Yet Less Than Half Offer Their Employees A Retirement Plan?¹
These five simple reasons are why your organization should take action against this crisis:
- Now is the time. Thanks to the SECURE Act 2.0 of 2022, it has never been a better time to start a 401(k) plan. Beginning in 2023, employers with 100 or fewer employees are offered enhanced tax CREDITS to start a plan. Tax credits are NOT deductions, they reduce your business’s tax liability dollar- for –dollar! Over a three year period, for qualifying employers, that is a potential credit of $16,500² plus available credits for certain employer contributions. And depending on the state, mandates may require employers to offer a retirement plan.
- Opportunity for tax deferral and tax deductions. Your organization’s employees (including yourself) can save taxes today through pre-tax contributions and let your money grow tax deferred. Although employer contributions are not required, they can help your bottom line. Employer matching and profit sharing contributions are tax-deductible and not subject to Social Security or Medicare taxes. These are two great options to consider when you are looking to reduce your business’ tax liabilities.
- Necessity to attract and retain top talent. Over 80% of Americans say that retirement benefits are a major factor in accepting a new employment offer3. Now more than ever, the availability of a retirement plan is an expectation, not a luxury. Investing early empowers Americans with future financial freedoms. With your help and the power of compounding interest, the earlier you start, the less your employees may have to save in aggregate to achieve retirement goals.
- Improve employees’ financial wellness. Nearly three-quarters of employees said that reducing employee stress was a key objective for 20204. In today’s environment, mental, physical and financial health are intertwined. Introducing a retirement plan to your overall benefits program will help employees feel more confident in their financial future, leading to a more focused and enthusiastic workforce.
- You don’t have to go it alone. The Department of Labor encourages employers to hire prudent experts to ease the fiduciary burdens of offering a retirement plan. This may sound expensive, but rest assured that Raymond James is committed to bringing the high quality, low cost solutions more typical of larger plans to the small business community.
EVERY ORGANIZATION, NO MATTER THE SIZE, SHOULD HAVE THE ABILITY TO OFFER A QUALITY 401(K) PLAN SO THAT EVERY WORKER CAN SAVE FOR RETIREMENT.
2Small businesses with up to 50 employees can now receive a federal tax credit for plan administrative costs up to $5,000 in each of the first three years of a new plan. Additional credits are available for employer contributions to these startup plans. In particular, a credit of 100% of the contribution, up to a maximum of $1,000 per employee, is available the first year of a plan’s creation; a credit of 75% of the contribution, up to a maximum of $750 per employee, is available the second year; a credit of 50% of the contribution, up to a maximum of $500 per employee, is available the third year; and a credit of 25% of the contribution, up to a maximum of $250 per employee, is available the fourth year. These contribution credits are phased out for employers having between 51 and 100 employees at 2% per employee over 50 employees. Source: Raymond James, “SECURE Act 2.0: Changes to Employer-Sponsored Retirement Plans”
3 Source: 19th Annual Transamerica Retirement Survey of Workers,” April 2019
4 Source: Franklin Templeton’s “Voice of the American Worker” survey
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.