Michael Gray interviews Phil Price, EA, of The Price Company for Financial Insider Weekly on “Qualified Retirement Plans for Closely Held Businesses.” …(read more)

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Qualified Retirement Plans for Closely Held Businesses 2012

For small business owners, offering a qualified retirement plan to their employees can be an essential tool for attracting and retaining top talent, as well as providing a valuable benefit for staff members. However, for closely held businesses, setting up and managing a qualified retirement plan can be a complex process. In 2012, there were several key considerations and options for closely held businesses when it came to offering retirement benefits to their employees.

One of the most common qualified retirement plans for closely held businesses is the 401(k) plan. This type of plan allows employees to make contributions from their pre-tax income, and many employers choose to match a percentage of these contributions. In 2012, the contribution limits for 401(k) plans were $17,000 for individuals under the age of 50, and $22,500 for those over 50.

Another option available to closely held businesses in 2012 was the Simplified Employee Pension (SEP) plan. A SEP plan allows employers to make contributions to individual retirement accounts (IRAs) for their employees, based on a percentage of the employees’ compensation. In 2012, the contribution limits for a SEP plan were the lesser of 25% of an employee’s compensation or $50,000.

In addition to 401(k) and SEP plans, closely held businesses also had the option of offering a profit-sharing plan in 2012. This type of plan allows employers to make discretionary contributions to the retirement accounts of their employees, based on the company’s annual profits. The contribution limits for a profit-sharing plan in 2012 were the lesser of 25% of an employee’s compensation or $50,000.

When considering which qualified retirement plan to offer, closely held businesses in 2012 needed to take into account several factors, including the cost of setting up and maintaining the plan, the administrative burden, and the tax advantages for both the employer and employees. Additionally, 2012 brought changes to the rules and regulations governing retirement plans, which meant that businesses needed to stay informed and compliant with the latest legislation.

Ultimately, offering a qualified retirement plan can be a valuable investment in a closely held business’s employees and future success. In 2012, small business owners had a variety of options available to them, each with its own advantages and considerations. By carefully evaluating the needs of their employees and the resources of their business, closely held businesses could choose the retirement plan that best suited their unique circumstances. With the right plan in place, businesses could attract and retain top talent, while also providing a valuable benefit to their staff members. In 2012, navigating the landscape of qualified retirement plans for closely held businesses required careful consideration and expert guidance, but the potential benefits made it a worthwhile endeavor for many small business owners.