Small Company, Many Plan Options

Small Company, Many Plan Options

February 24, 2021

Regardless of size, small businesses have many options for employee retirement plans they can offer as part of their overall benefit package.

A few weeks back, a friend reached out about a company plan for his growing Whatcom County construction business. His goals were twofold: 1) reward his hardworking crew and, 2) retain his employees for the long term.  As we dug into this idea it became apparent he not only wanted to do this, but to remain a competitive employer, felt he had to do this.

According to SCORE, a nonprofit provider of mentor services to U.S. small businesses, only 28% of businesses with fewer than 10 employees offer retirement plans for employees, 51% of businesses with 10 to 24 employees offer retirement plans, and 63% of businesses with 25 to 49 employees offer retirement plans. Even more concerning, an additional study found that 48% of departing employees said a lack of company retirement benefits influenced their decision to leave.

Besides rewarding and retaining top talent, there are many other benefits to company sponsored retirement plans for both the employer and the employee. These include:

  • Eligible employers may be able to claim a tax credit of up $5,000, for three years, for ordinary and necessary costs of starting a SEP, SIMPLE IRA or a qualified plan (like a 401(k) plan). A tax credit can reduce the amount of taxes you may owe on a dollar-for-dollar basis.
  • Because these plans offer a variety of investment options including mutual funds, stocks and bonds, participants can design their own investment strategy based on their individual goals, risk tolerance and time horizon.
  • There are several options specifically designed for small business that are both affordable and easy to administer from self-employed people to companies with up to 100 employees.
  • Employee contributions can lower their own taxable income, thus potentially lowering their year-end tax burden.
  • Contributions can grow tax-deferred until withdrawals during retirement, with the hope that employees will be in a lower tax bracket when taking those withdrawals.
  • If the employer has a match plan, they may deduct the match amount from business income. This can lower business taxes while simultaneously rewarding employees.

No matter the size of your company, establishing a company plan as part of a comprehensive benefit package can be a win-win for you and your employees.  Setting up a plan is straight forward, reach out anytime with ideas or questions.  We’re happy to help.


This is meant for educational purposes only.  It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions.  (02/21)