Published April 2004

Tips, resources for setting up retirement plan

Dear BizBest: I’m far from retirement, but my business is profitable, and small-business retirement plans sound like a great deal. From what I’ve read, there are many choices. Maybe too many, because it’s quite daunting. How can I compare plans and find out what’s best for me? — Thinking Ahead

Dear Thinking Ahead: Good thinking! The sooner you get it going, the better. In fact, the ability to set up a tax-deferred retirement plan for you and your employees is one of the key benefits of owning a business. But half of all business owners are missing out, in part because they simply don’t know the options available.

“Many business owners think setting up a retirement plan is too complex or costly, so they put it on hold,” says Randy Berry, an official with Fiducial, a global firm that provides tax and financial services to small business. “But a retirement plan can actually be the least expensive benefit a small business can offer.”

You can even take tax credits for the costs of starting a plan — a rule change that few business owners are aware of, says Berry. There are indeed many variations to choose from, and the one that’s right for you will depend on factors such as your age, the profitability of your business and how much you want to sock away each year.

Most small businesses opt for a Simple-IRA, a SEP (Simplified Employee Pension) or a 401(k). Anticipate paying up to $1,200 to start a new plan plus $25 to $40 annually per participant, though costs can be lower depending on the type you choose and the number of employees you have (if any). Here are key resources on small-business plans:

n SmartMoney.com offers one of the best small-business retirement plan comparison charts available free. At the Web site, go to “Personal Finance,” then “Tax Guide” and finally “Work & Business Taxes” to find it.

n Fiducial, a global financial services firm that entered the U.S. market in the late 1990s, caters specifically to small business and has aggressively expanded to 600 offices (some franchised) in 350 cities. The company’s Web site has a helpful “Small Business Center” with information on retirement plan choices. Select “Benefits for Your Workers” under the “People Who Work for You” heading. Visit www.fiducial.com.

n TheOnline401k.com was formed in 1999 to provide small business with a low-cost 401(k) free of annoying hidden fees. They offer a plan for one-person firms, and another for businesses with two to 50 employees. Visit the Web site or call 877-775-401k.

n Retirement Planners offers a full line of plan design and administration services for businesses of all types and sizes. Visit www.retirementplanners.com or call 888-689-5530. E-mail info@retirementplanners.com.

n Books can help, but tax laws change quickly, so get something recent. One good choice is “Qualified Retirement Plans for Small Businesses” by Barry Milberg ($49). It’s published by CCH Inc., creator of Business Owner’s Toolkit (www.toolkit.cch.com). Covers profit-sharing, SEP, 401(k) and SIMPLE plans, as well as money purchase pension plans, paired plans, ESOPs, defined benefit plans and cash balance plans. Call 800-248-3248 or visit www.hr.cch.com.

n Most mutual fund companies, brokerage firms, banks and insurance companies offer small-business plans. Any of the major no-load fund firms, such as Fidelity (www.fidelity.com), Vanguard (www.vanguard.com) or T. Rowe Price (www.troweprice.com), for example, can provide a complete package of standard documents and services to get your small-business plan off the ground. Payroll firms such as ADP can also help. Visit www.adp401k.com for details.

n The IRS small-business Web site, at www.irs.gov/smallbiz, has extensive information on all retirement plan choices, including their differing tax benefits and requirements. Click on “Employees — Retirement Plans” near the bottom of the main page.

BizBest publishes “The 100 Best Resources for Small Business” and other business resource directories. Visit www.BizBest100.com. E-mail questions to dan@bizbest.com.

Back to the top/April 2004 Main Menu