Business Owner Retirement Plans
Business Owner Retirement Plans
Business owner retirement plans are designed for the owner who is seeking a retirement funding opportunity, or evaluating an existing retirement plan. The challenge for you, as a small business owner, is to determine what is the most beneficial way to build your assets, both from an accumulation and a tax-savings viewpoint, so that they will be available to help you achieve your retirement goals.
Does Your Business Need Additional Tax Deductions?
Is it costing you money NOT having a retirement plan? does your business have all the tax deductions it needs? do you have all the retirement income you need are you looking for a way to attract and keep employees? If your business has a retirement plan, is it the right plan for your needs? are you satisfied with the fees and administration? do you have a large selection of investment options? are you satisfied with the return? has your plan been reviewed after the recent tax law changes liberalizing the rules for business owners and senior executives?
412(e)(3) Defined Benefit Plan
A good candidate for this plan design is a business owner with few employees (or none) who is earning a very high income. This plan design allows the largest possible deductions for the business owner, and it liberates owners from the contribution limitations of 401(k) and profit sharing plans. There is little flexibility in the contribution level each year. All benefits must be guaranteed by an insurance company so all assets must be in insurance company life insurance and annuity contracts. The benefits provided are dependent upon minimum premium requirements and the claims paying ability of the issuer.
New Comparability Profit Sharing Plans
The plan is best suited for the business owner who is older than most of the other employees. This plan design allows for the largest possible share of the company’s contribution to be allocated to the owner and/or key employees. The contribution level is a flexible since it is a profit sharing plan and the contribution each year is discretionary. This graphic shows how the owner’s allocation has increased from $35,512 to $55,000. The result is a 57% increase to the owner with no increase in the contribution from the business:
Safe Harbor 401(k) Plans
These plans allow the key employees to contribute up to the maximum dollar limit of $19,000 for 2019 as their 401(k) elective deferral without regard to what the other employees contribute. The maximum deferral for 2019 is $25,000 if a participant is age 50 or over. In a traditional 401k plan, the contribution for highly compensated employee may be limited and is dependent upon what all other employees contribute as elective deferrals to the plan. One way to satisfy the safe harbor rules is to make a 3% fully vested contribution for all employees. The end result can be a very appealing plan.
Owner Only 401(k) Plans
These plans are for a small business owner with no employees who wants complete flexibility. The owner only 401(k) Plan is a traditional 401k plan that it covers a business where the only eligible employee is the owner, or the owner and a spouse. In this type of plan, the business owner is the employee and employer. You are allowed to make contributions to the plan as an employee or an owner.
These plan designs can be customized to help you convert current taxes to assets, defer tax payments, and generate the retirement income you desire .
Whether you have a retirement plan or not, you need to review the new plans created by recent tax law changes available for small business owners. Today’s modern retirement plans may allow the small business owner to receive 60%, 70%, or even more of the deductible business contribution. In such cases, it could be costing you money not having a plan.
We can give you a free look at these innovative retirement plans available today that can help you achieve your retirement goals.