Employee Retirement

Setting up an employee retirement plan can be a smart way to provide for one of your key assets-your employees- as well as benefitting you and your business. We work with professional retirement companies and we sit down and discuss which is the most suitable option for you and your employees.

Types of Retirement Accounts

401(k) Plan

A 401(k) plan is one of the most popular employer-sponsored retirement savings options. Employees can contribute a portion of their salary, typically on a pre-tax basis, and employers may offer matching contributions.

Key Features:

  • Pre-tax contributions (Traditional 401(k)) or Roth 401(k) options for after-tax contributions.
  • Contribution limits: For 2024, employees can contribute up to $23,000 ($30,500 if 50 or older, with catch-up contributions).
  • Employers may match a percentage of employee contributions.
  • Investment options are typically limited to a selection of mutual funds or ETFs.
     

403(b) Plan

Similar to a 401(k) but designed for employees of certain nonprofit organizations, schools, and government entities. It allows employees to make tax-deferred contributions toward their retirement.

Key Features:

  • Contributions are made on a pre-tax basis (traditional 403(b)) or after-tax (Roth 403(b)).
  • Catch-up contributions available for employees over age 50.
  • Limited to certain organizations (e.g., public schools, charities, hospitals).
     

Traditional IRA (Individual Retirement Account)

An IRA is a tax-advantaged account that individuals can open independently of an employer. Contributions are typically tax-deductible in the year they are made, and withdrawals are taxed at ordinary income rates in retirement.

Key Features:

  • Contribution limit for 2024: $6,500 (or $7,500 if over age 50).
  • Tax-deferred growth until retirement.
  • Required minimum distributions (RMDs) start at age 73.

Roth IRA

A Roth IRA is similar to a Traditional IRA but allows for after-tax contributions. The key advantage is that qualified withdrawals in retirement are tax-free.

Key Features:

  • Contributions are made with after-tax dollars.
  • Qualified withdrawals (after age 59½ and after the account has been open for at least 5 years) are tax-free.
  • Contribution limits are the same as for a Traditional IRA: $6,500 or $7,500 if over age 50 (for 2024).
  • Income limits apply to eligibility for contributions.

 

SEP IRA (Simplified Employee Pension)

A SEP IRA is typically used by self-employed individuals or small business owners to make retirement contributions on behalf of themselves and their employees.

Key Features:

  • Employers make contributions to the accounts of eligible employees (not employees contributing themselves).
  • Contribution limits are higher than those of a traditional IRA: up to 25% of compensation, or $66,000 for 2024 (whichever is lower).
  • Employer contributions are tax-deductible.
  • No catch-up contributions allowed.
     

Simple IRA (Savings Incentive Match Plan for Employees)

A Simple IRA is designed for small businesses with fewer than 100 employees. Both employers and employees can contribute, but the contribution limits are lower than those for a 401(k).

Key Features:

  • Employee contribution limit: $15,500 in 2024 (or $19,000 if over age 50).
  • Employer contribution requirement: Employers must either match employee contributions dollar-for-dollar up to 3% of compensation or contribute 2% of each eligible employee's salary.
  • Easier to administer than a 401(k).
     

 

Simple IRA

Profit-Sharing Plan

Profit-sharing plans allow employers to make discretionary contributions to employees' retirement accounts, often based on company performance.

Key Features:

  • Employers determine contribution amounts each year (typically a percentage of salary).
  • Contributions are tax-deferred.
  • Contribution limits: For 2024, total contributions (including employee deferrals) can’t exceed $66,000 or 100% of an employee’s compensation.

Cash Balance Plan

A cash balance plan is a type of defined benefit plan that acts like a hybrid between a pension and a 401(k). It provides employees with an individual account that grows based on a set interest rate and employer contributions.

Key Features:

  • Guaranteed minimum annual contributions from the employer.
  • Contributions are typically based on a formula tied to age and salary.
  • Employees have an individual account balance, but the retirement benefit is predictable.
  • Typically used by employers looking to provide a pension-like benefit.

Solo 401(k)

Also known as an individual 401(k), this is for self-employed individuals or business owners without full-time employees (other than a spouse). It allows for higher contribution limits than an IRA.

Key Features:

  • Employee deferral limit of $23,000 for 2024 (or $30,500 if over 50).
  • Employer profit-sharing contributions can bring total contributions up to $66,000 for 2024 (or $73,500 if over 50).
  • Offers both traditional (pre-tax) and Roth (post-tax) contribution options.

 

Contact Us