Retirement Programs for Small Business Employers - Essay Example

296513 Retirement Programs for Small Business Employers The government, through the ministry of labor has laid down several programs for the benefits of the retirement of small business employers and advisory centre for assistance in understanding the employment laws for the owners of small businesses usually referred to as the elaws. The elaws helps the employers as well as the employees to know their rights and obligations as provided for in the federal employment laws. The advisors of the elaws include some interactive tools which give information that is easy to comprehend. The elaws have been beneficial to both the employees and the employers. They also provide connections to other elaborated data regarding regulatory information, organizations and publications. Research as indicated that, in spite of the emphasis on the significance of the retirement plans, about 40% of the small-business employers have never had one of them. This has been mainly attributed to the employer’s ignorance in these programs. In selecting a provider for retirement plan, a small business owner ought to go for the one with an outstanding reputation in providing high-quality, efficient and accurate services in a climate of trust and confidence. It should also have a big record of assisting clients to create, develop, run and maintain financial assets by installing a plan that calls for comprehensive and personalized investment. A good provider of retirement plan has some qualities such as dedication, strength, size as well as stability to help sail through the changing and complex world of retirement plans. There are several retirement plans available for the business employers to choose from including the following according to (Grazian, 2007). A simplified Employee Pension plan (SEP) is relatively flexible retirement scheme that gives employees a chance to subscribe to tax-favored scheme to Individual retirement accounts (IRs) that are possessed by the employers. The plan is subject to disclosure requirements and minimal reporting. Through this program, the employers can create SIMPLE IRA plans that have salary reduction subscriptions. The workers are required to establish an IRA in order to receive the employer’s contributions. A Profit Sharing Plan or Stock Bonus plan is a subscription plan where by the employers decides the amount they will be contributing for a given duration mainly annually depending on the profit generated. It has a sequence for giving to every participant a certain amount of every contribution made annually. A 401 (k) plan This is an elaborated subscription plan with cash or deferred procedures. The employees under this plan can decide to postpone getting some percentage of their salary and instead let be contributed to the 401(k) plan. There is limitation of the minimum amount of contribution that one can make to the 401 (k). The workers participating in the plan assumes the obligation for the income from retirement benefits by subscribing their salaries or by directing their personal ventures. An Employee Stock Ownership Plan (ESOP) is a defined subscription module which has the investments being mainly in the employers stock. A Money Purchase Pension Plan is a defined scheme that demands fixed subscriptions annually from the employer to his workers’ personal accounts. It is subject to specific funding as well as other regulations. A Cash Balance plan refers to a benefit plan which explains the indicated benefits as in the indicated account balance. In this plan the participant’s account is toped up annually with a pay credit which indicates a certain percentage of his or her employer’s compensation in addition to some interest rate credit which might be either fixed or varying. Changes in the value investments of the plan do not have impact on the benefit amount indicated to the participants. This implies that the risks and profits of the investments are borne only by the employer. During the time of receiving the benefits under this plan the received benefits are explained as regarding an account balance. Some other small programs include; versatile investment program that has retirement plan with prototype containing specialized investment account meant for the specific needs of a company; Retirement plan manager which offers brokerage account meant to ease the retirement plan activities of some small to medium sized organizations. A Profit Sharing Plan or Stock Bonus plan program would the most favorable plan for most sole proprietors owning a small business. It has secretarial charges which are lower than other Individual retirement accounts (IRA). It provides a wide option for employers regarding subscriptions. The deferments on tax do not affect the business owner’s account that grows from the made subscriptions. There are no imposed taxes on the dividends or from gains from capital or the accumulated interests. The programs have been found easy to access because it is easy to set up, there is transparency of the charged fees, easy to make use of once implemented, affordable and offers quality as well as a wide range of investment alternatives that are readily available. This program is well recognized by small business owners as important and desirable because having it gives you room for better management of your retirement plans. Using this program to take part in ones retirement savings provides a greater peace of mind. Most of the small business employers who have retirement plans have this program. Fred (2009) asserts that, with the on going economic crisis that is creating fresh challenges to the small businesses owners as well as company retirement planning, a great number of the employers have changed their perception of their retirement and have made efforts in adapting these programs. The economic situation currently is calling for retirement programs especially business, communities and families health and security. A number of the employers still find it hard to subscribe to the retirement benefits plans. The Profit Sharing Plan or Stock Bonus plan would assist in establishing concrete future considering the current economic climate for small business owners. While most workers believe that it is the obligation of the employers to provide retirement benefits for them, the business owners see it as an opportunity to attract and maintain the most effective employees. References Grazian, R. (2007). About Small Business Retirement Plan. Retrieved May 7, 2009, from http://ezinearticles.com/?About-Small-Business-Retirement-Plan&id=800426 Fred, S. (2009). Small-Business Employers Still Onboard with 401(k) s .Retrieved May 7, 2009, from http://www.planadviser.com/research/article.php/4135 Read More