khn Posted October 24, 2023 Posted October 24, 2023 What are the best options for someone who wants to offer their 1 employee a retirement plan? This would only be for the employee, not an owner.
Popular Post CuseFan Posted October 24, 2023 Popular Post Posted October 24, 2023 Like most open ended questions the answer is it all depends. What is the objective - rewarding/sharing in profits, retention/competitive comp & benefits package? What is the industry, how much does the person make, what can the employer afford to provide? If the employer provides other substantial benefits on the health and welfare side, maybe a SEP or SIMPLE IRA or 401(k) plan with a match is appropriate. If the employee is invaluable, say hired to run someone's business for them, then maybe a 401(k) with a substantial profit sharing is appropriate, or even a defined benefit plan if $60k-$70k in annual retirement isn't enough, although if the owner is also an "employee" then this may or may not be possible depending on circumstances. Answers to those two questions at a minimum are necessary and you ask for "best options" - for the employer or employee or blending the needs for each? duckthing, Towanda, Luke Bailey and 2 others 5 Kenneth M. Prell, CEBS, ERPA Vice President, BPAS Actuarial & Pension Services kprell@bpas.com
Luke Bailey Posted October 26, 2023 Posted October 26, 2023 khn, CuseFan's advice is spot on, but he leaves out the more modest and simpler alternative, which would be a SIMPLE IRA. I would take a look at that as well. Appleby 1 Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034
Bri Posted October 26, 2023 Posted October 26, 2023 Good point about a SIMPLE (with a match) since the owner may not want to have to cover himself under the SEP, as the OP suggests. Luke Bailey 1
Appleby Posted October 26, 2023 Posted October 26, 2023 On 10/24/2023 at 3:09 PM, khn said: What are the best options for someone who wants to offer their 1 employee a retirement plan? This would only be for the employee, not an owner. Agree with CuseFan too. Perform a suitability assessment. That will help you to determine what features/benefits are most important to the employer. If the owner is an employee, they will have to be covered too, if they meet the eligibility requirements. But, with a SIMPLE IRA where the employer elects the matching contribution option, the employer can exclude themself by not making salary deferral contributions. Life and Death Planning for Retirement Benefits by Natalie B. Choatehttps://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/ www.DeniseAppleby.com
Bird Posted October 26, 2023 Posted October 26, 2023 I think a lot depends on how much the owner wants to contribute, and how much control s/he wants to have over the account. A SIMPLE IRA might work (and CuseFan did mention it BTW), but being an IRA, the money is completely out of the sponsor's control once it is deposited. A 401(k) could have vesting on the employer contributions, and generally more restricted access, but at a higher cost. Ed Snyder
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