Small Business Retirement Plans
Planters Bank Trust Services can help you with your small business retirement planning. We offer several plans through our Trust Services.
A Simplified Employee Pension Plan, commonly known as a SEP-IRA, is a retirement plan specifically designed for self-employed people and small-business owners. When establishing a SEP-IRA plan for your business, you and any eligible employees establish your own separate SEP-IRA; employer contributions are then made into each eligible employee’s SEP-IRA.
You can establish a SEP-IRA if you:
- Are a sole proprietor, in a partnership, or a business owner (of either an unincorporated or incorporated business, including Subchapter S corporations);
- Earn any self-employed income by providing a service, either full-time or part-time, even if you are already covered by a retirement plan at your full-time job.
Tax-deductible contributions up to 25% of compensation.
Tax-deferred growth potential -- any investment earnings grow tax-deferred until withdrawn.
No annual contribution required
- Contribution percentage can vary each year, from 0% - 25% of compensation.
- The employer must make all SEP-IRA contributions, and the same percentage of compensation must be contributed for each eligible employee (based on W-2 wages) including the employer.
SIMPLE IRA Plan allows you and your employees to make contributions to SIMPLE IRAs. Contributions can be made via elective deferral (employee) and matching or non-elective contributions (employer). Employer contributions are tax-deductible and employee contributions are excluded from income for federal income tax purposes.
You can establish a SIMPLE IRA if you:
- Sole proprietorships, partnerships, limited liability corporations (LLCs), or incorporated businesses, including subchapter S corporations with 100 or fewer employees, may establish a SIMPLE IRA Plan.
- All eligible employees must be allowed to participate in the SIMPLE IRA Plan. An eligible employee is any employee who:
- Received at least $5,000 compensation from the employer during any two years, preceding the current calendar year and is reasonably expected to receive at least $5,000 in compensation from the employer in the current calendar year.
- Employer contributions are tax deductible for the employer.
- Employee elective deferrals are excluded from the employee’s income for federal income tax purposes.
Tax-deferred growth potential
- Tax-deferred growth – any investment earning grow tax-deferred until withdrawn.
- The employer may elect a matching contribution formula or a non-elective formula of 2% of compensation for all eligible employees. If a matching formula is elected: The employer must match the employee’s elective deferrals up to 3% of the employee’s compensation for the year.
- An employer can choose different alternative for each year; the 3% match can be reduced to a minimum of 1%. The employer cannot choose a percentage less than 3% for more than 2 years during a 5 year period that ends with and includes the year for which the choice is effective or
- The employer may elect the non-elective formula of 2% of all eligible participants’ compensation. Under this formula, all eligible employees would receive this non-elective contribution whether making elective deferral contributions or not.
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