Business Retirement Plans For Small Businesses

2007-03-08 10:33:40

( Insurance )



Retirement planning is one way to set aside money for you to utilize when you grow old, and cease to be employed. Insurance companies, employers, the government and trade unions typically set up business retirement plans.

Different types of business retirement plans are available for small businesses. There are small business retirement plans that cater to self-employed people, independent contractors, sole proprietorships and partnerships.

A simplified employee pension (SEP) plan is the easiest way to form a retirement scheme. The employee needs to establish an individual retirement account under each employee’s name. The employer is responsible for making deposits into the account up to a certain amount each month. The employee is free to withdraw or transfer the funds that are deposited, but certain government regulations apply.

A savings incentive match plan for employees (SIMPLE) is for companies that have a specific number of staff employed. It is the employee who contributes a majority of the money for the scheme. The employer also contributes to the employee’s retirement account; however, it is only equivalent to a very small portion of the employee’s monthly salary. All funds that are deposited into the account are not taxed until withdrawn.

Anoter retirement plan is applicable to partnerships and sole proprietorships only. Funds that are set aside for retirement are taken from the employee’s gross income. If a business does not perform well in any given year, monthly contributions may be exempted. Similar to the SIMPLE plan, funds are taxable when withdrawn.

Business retirement plans for small businesses also include profit sharing plans. This scheme is made available to only employees who choose to register for the plan. Employers determine the amount to contribute monthly, and a fixed formula is utilized to calculate an employee’s share.

A money purchase pension scheme is similar to a profit sharing scheme. The only difference is that it requires the employer to contribute a specified amount to the employee’s retirement account each year.

Above are only some of the small business retirement plans that are available in the market. An accounting professional can provide advise on suitable business retirement plans for your business.


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