Establishing a retirement plan for your company is not as easy
as you may believe it is. Finding a capable local investment or
insurance representative is just one step. To make sure you satisfy
your employees and comply with government regulations, you should
educate yourself before establishing and managing your company's
retirement plan.
The first thing to consider is plan design. New Internal Revenue
Service (IRS) rules involving safe harbor 401(k) contributions,
which are similar to traditional 401(k) contributions but must
provide for employer contributions that are fully vested when made,
allow employees to maximize their contribution rates and contribute
up to $15,500 of their salaries. An additional $5,000 may be
contributed by employees older than 50. This type of plan will
enable you to maximize contributions for yourself and key
employees.
Additionally, new cross-tested plans—employer-sponsored,
defined contribution retirement plans that favor older, long-term
employees—allow different employer contribution rates for
different employee classifications. This type of plan can allow a
contribution rate for key employees of up to three times the
contribution rate for nonkey employees. A retirement plan adviser
can explain...
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