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Best small business retirement account contribution rate for President/ owners?
Posted on 1/5/24 at 1:13 pm
Posted on 1/5/24 at 1:13 pm
I've had my small business (S Corp) for 10 years but this will be my first year that I have an employee employed for 3 years. I have been using a SEP. My understanding is that I have to start offering retirement to employees of 3 years or more and that all employer contributions to employees have to be equal? I am not looking to screw over my employees, but lets say I'm currently doing a $25,000 employer contribution rate to the only employees. I won't be able to offer that to all new employees.
Am I correct in that once I have these employees there are no good employer contribution methods to limited employees like myself? Most of my personal contributions need to be moved from employer to employee (me)?
ETA: I have a meeting with my accountant I'm just trying to explore my options now.
Am I correct in that once I have these employees there are no good employer contribution methods to limited employees like myself? Most of my personal contributions need to be moved from employer to employee (me)?
ETA: I have a meeting with my accountant I'm just trying to explore my options now.
This post was edited on 1/5/24 at 1:15 pm
2
Posted on 1/5/24 at 2:07 pm to baldona
SEPs would be a percentage for all participants. So if the $25k is 25% of your comp then you certainly don't want to do that.
You will likely need to swap to a 401(k) in order to hit your $ targets. It will probably need to a what is referred to as a Safe Harbor plan in order for you to hit similar targets on contribution dollars if the employees are not going to defer at high rates.
If your targets are lower then you might be able to do a SIMPLE.
You will likely need to swap to a 401(k) in order to hit your $ targets. It will probably need to a what is referred to as a Safe Harbor plan in order for you to hit similar targets on contribution dollars if the employees are not going to defer at high rates.
If your targets are lower then you might be able to do a SIMPLE.
Posted on 1/7/24 at 8:03 am to baldona
I have an S-Corp and a SEP. You either have to give everyone the same annual payout, or 25% of each person's salary. What I do is the 25% contribution, and pay myself and my wife (owner) a salary that maxes out the $66K (now $68K) contribution for the year, otherwise I would have to pay everyone $66K.
Yes, after three years you have to offer the plan to the employee, but you could offer it on day 1 if you choose, but it applies to everyone and not just for a rockstar new hire.
I consulted with a tax attorney about this. I recommend establishing a relationship with one.
Yes, after three years you have to offer the plan to the employee, but you could offer it on day 1 if you choose, but it applies to everyone and not just for a rockstar new hire.
I consulted with a tax attorney about this. I recommend establishing a relationship with one.
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