09/ 06/ 2007
You do many things to attract and retain employees, which might include offering fair vacation-time benefits, health-insurance coverage and a year-end bonus when the company does well. But one of the most important benefits you can offer your employees —and yourself—is a retirement plan.
There are even some tax incentives to doing so.
Three government agencies handle the regulation of qualified retirement plans: the Internal Revenue Service, the Department of Labor and the Pension Benefit Guaranty Corporation. But what is a "qualified" plan comprised of?
According to AARP.com, the four areas of greatest concern are:
- Minimum standards of coverage for employees (minimum participation requirements)
- Minimum standards on vesting (non-forfeit ability of earned benefits)
- Rules for minimum contributions and benefits.
- Minimum standards for funding (to ensure funds will be available to pay benefits)
Generally, a qualified plan must:
- Be in writing and be communicated to the participants covered by the plan
- Be intended for the exclusive benefit of participants or their beneficiaries
- Ensure that funds cannot be diverted to purposes other than providing benefits for participants or their beneficiaries
- Prohibit assignment of benefits
- Contain a claims procedure
- Not discriminate in favor of officers, shareholders or other high-level employees
- Meet various reporting requirements
- Provide annual reports concerning the plan’s status with the IRS, DOL and PBGC
So, how do you get started with a retirement plan for your small-business employees? First, always seek legal advice to make sure the plan you're considering follows the regulations and guidelines of the three governing agencies.
Second, pick up the phone and contact a benefits consultant or an actuary to help design the plan that's best for and attractive to your current employees and potential employees of all ages. You will also need someone to manage investments, administer the plan and communicate with employees.
To learn more about retirement plans for your small business, read these articles:
- "Retirement Plans Benefit Both Your Workers and Your Company"
- "For Smaller Firms, a 412(i) Retirement Plan Could Be the Answer"
The information here is general in nature and subject to change. It is not intended as legal advice. Consult a professional for more information about the particulars of your small business' needs.
