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Uncle Sam Wants to Help You Retain Employees!
January 12, 2007
Is attracting and keeping quality employees one of your biggest challenges as a business owner or manager?As I talk to business owners, they repeatedly tell me recruiting and retaining employees is critical, yet many think they can’t afford to offer a key benefit -- a retirement plan.
According to a survey conducted by the Employee Benefits Research Institute among companies with 25-99 workers, participation in retirement plans drops to 36%. In the smallest companies, with fewer than 25 workers, participation is dismally low – just 15%.
If you, like many construction companies, are competing for employees, you may pay a bigger price for not offering a retirement plan.
“…The construction industry needs skilled craft professionals more than ever,”says Dave Meyer, 2007 National Chairman, Associated Builders and Contractors.In a Dec. 16, 2006, HousingZone article, he states, “In 2006, workforce shortages became a harsh reality for much of the construction industry, and the crisis is only expected to worsen in the new year.” (http://www.housingzone.com/probuilder/article/CA6401353.html),
Whether you own a small company or work as an employee in one, you should know about three features of our tax law that make it easier to for you to offer retirement plans.
- Federal Tax Credits
Congress created two federal tax credits related to retirement plans. One, designed for companies with 100 or fewer employees that start new plans, creates eligibility for a tax credit to offset a portion of administrative and participant education costs during the first three years of the plan’s life. The second tax credit is available for low-income and middle-income participants in retirement plans of all types and sizes.
- Enhancements to SIMPLEs
The tax law has added important enhancements to SIMPLEs, a type of retirement plan created for small companies in 1997. The maximum amount of money that a worker can “defer” into a SIMPLE has been increased to $10,500, with annual indexing for inflation afterward. Also, workers age 50 or older will be able to make additional “catch-up deferrals” above these limits.
- Other Incentives
Several other incentives in U.S. tax law encourage small companies to set up plans. A variety of funding limits have been gradually raised,. Small business owners have more freedom to sock money away for their own retirements, with tax advantages. The top-heavy rules that have added red-tape for thousands of small companies in the past have been relaxed, too.
The above explanations are brief and simplified versions of a few federal tax incentives, so now is a good time to check in with a qualified financial professional to review the many good reasons to create a retirement plan. The barriers that have prevented so many small companies from offering plans are falling, and with that, you have new tools with which to attract and retain employees.
Suzanna de Baca is President of Private Capital Solutions Group, a financial and investment firm in Des Moines, Iowa. She is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 7 Hanover Square, New York, NY 10004, (888) 600-4667. Securities products/services and advisory services are offered through PAS, a registered broker/dealer and investment advisor. Private Capital Solutions Group is not an affiliate or subsidiary of PAS.
PAS is a member NASD, SIPC.
Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice.
Posted by Suzanna de Baca on January 12, 2007 | Comments (0)
