5 Tips for Setting Up a Small Business Employee Retirement Plan
You’d love to offer a generous retirement plan for your employees, but when you don’t have your own HR department, choosing and maintaining the plan can be time-consuming, costly, and complicated. Here are a few tips for simplifying your company’s retirement benefits plan.
Take a look at your options. The IRS offers a comprehensive guide to the various types of benefit plans open to small businesses. You may choose either an IRA-based plan, or a Defined Contribution plan such as a 401(k). In general, small businesses may be better off choosing an IRA plan, as it offers more flexibility in the contribution levels you’ll be expected to make to your employees’ retirement funds, but look over the details of each plan to see what looks like the best fit.
Keep an eye out for administrative errors. Filing the paperwork for retirement plans can be complicated, and any slip-up can leave you subject to IRS fines. When setting up your retirement plan, look over the IRS’ Fix-It Guides for a list of the most common mistakes to ensure you’re not making any costly errors.
Use financial accounting software to track your retirement fund. In most cases, you can track your company’s retirement fund growth and contributions using the same software you might use to take manage your sales and expenses. Check out this list for a rundown of some great software tools for tracking your company’s finances.
Stay on top of compliance issues. The Department of Labor has many laws that regulate how retirement plans can be funded and used. To make sure you’re following the letter of the law, visit the Department’s Small Business Retirement Savings Advisor for links to relevant laws and publications — or, if it all seems a little over your head, consider meeting with an employment lawyer who can make sure that everything is in order.
Hire a retirement plan consultant. Whether you’ve already set up a retirement fund or you’re just beginning to consider it, it may be helpful to get assistance from someone who specializes in setting up and maintaining pension plans for small businesses. The consultant can help you determine the best fit based on your needs, assist with all the complicated paperwork, and handle ongoing administrative tasks like dealing with tax reporting documents. Although these services may be costly, they’re far cheaper than hiring a full-time HR person to oversee your benefits plan.