{"id":13375,"date":"2012-08-26T08:58:10","date_gmt":"2012-08-26T12:58:10","guid":{"rendered":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2012\/08\/business-report-boucher-12-12.html"},"modified":"2017-11-08T11:13:53","modified_gmt":"2017-11-08T16:13:53","slug":"business-report-boucher-12-12","status":"publish","type":"post","link":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2012\/08\/business-report-boucher-12-12\/","title":{"rendered":"Business Report: The Time Is Now For A Retirement Plan"},"content":{"rendered":"
\"lisaboucher-hsc.jpg\"\n<\/div>\n
\n<\/div>\n

Lisa Boucher, MBA, SPHR, CEBS, senior benefits associate with CMJ, LLP.<\/em><\/p>\n

By Lisa Boucher, MBA, SPHR, CEBS<\/p>\n

If you’re planning on setting up a retirement plan for 2012 in order to maximize your retirement savings, your time is running out. A Profit Sharing or 401(k) Plan must be in place by December 31, 2012 for you to make contributions to it for the 2012 Plan Year.
\nThis requirement is set by the Internal Revenue Service (IRS). Setting up a Plan now for 2012 may seem odd however, if you’ve had a good year and have the cash flow; it could be worth putting some money away in a tax favored retirement plan. The best way to maximize that opportunity is with a Profit Sharing or 401(k) Plan.
\nMany business owners think that it’s too complicated or expensive to provide a 401(k) Plan for themselves and their employees. First off, even if you’re a sole proprietor, you can set up a plan for your business. Second, the amount you are allowed to defer is much greater in a 401(k) account than an IRA or other form of retirement account. Finally, the tax benefits are well worth the investment. Where else can you get an immediate return of up to 40 percent on your investment?<\/p>\n

The government allows a plan called a Solo-401(k) for a sole proprietor. This Plan allows the same maximum limits as a 401(k) Plan for a large company. The maximum deferrals for 2012 are $17,000, with catch up contributions of $5,500 allowed for anyone 50 and older. The maximum total contribution, including deferrals and company contributions, is $50,000 and $55,000 if you are over 50.<\/p>\n

Your IRA only allows a maximum of $5,000, with catch up contributions of $1,000 for anyone 50 and older. That’s a difference of $44,000. All of those contributions are contributed pre-tax as well. Even the employer contribution is tax free until the participant receives the benefit in the future.<\/p>\n

When a business sets up a 401(k) Plan it can deduct the expenses associated with establishing the plan. Also, any contributions the employer makes to the plan, up to 25 percent of aggregate compensation for all participants, can be deducted on the corporate tax return. So, not only are you putting away a pre-tax retirement benefit, you’re also creating a tax deduction for the business that will help you lower your taxable income.<\/p>\n

This benefit provided to your employees can also help with retention and longevity. Employees jump around a lot these days, most are looking for certain benefits when they decide to accept or reject a job offer. Having a retirement plan in place can help attract good talent and keep them in your organization.<\/p>\n

Employees see value in being provided with a retirement plan as most people don’t plan well on their own. Also, the profit sharing portion of a retirement plan can be set up with a vesting schedule. This means that you have to work for a company for a certain number of years in order to receive the entire benefit.<\/p>\n

Most plans are set up with a six year graded vesting schedule. This means that an employee must work for the company six years before becoming fully vested in the benefit that’s been provided for them through the profit sharing portion of the plan. This will help with retention of good employees as most people don’t like to walk away from free money. (Of course, any deferrals they make are always 100 percent vested.)<\/p>\n

One final option to consider is integration with the Social Security limit. This allows higher paid employees to receive a larger benefit from profit sharing without jeopardizing the compliance status of the plan. The IRS requires that all participants receive equal benefits under the plan on a percentage basis. However, making the plan integrated allows those who hit the Social Security wage base to be given a higher percentage of a contribution.<\/p>\n

There are several factors to consider when setting up a plan. But in most cases, the benefits far outweigh the costs. The sooner you begin a plan the better, as compounding over time is the best way to build wealth in a plan. However, that’s a discussion for another day.<\/p>\n","protected":false},"excerpt":{"rendered":"

Lisa Boucher, MBA, SPHR, CEBS, senior benefits associate with CMJ, LLP.By Lisa Boucher, MBA, SPHR, CEBS If you’re planning on setting up a retirement plan for 2012 in order to maximize your retirement savings, your time is running out….<\/p>\n","protected":false},"author":87,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"yoast_head":"\r\nBusiness Report: The Time Is Now For A Retirement Plan - Glens Falls Business Journal<\/title>\r\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\r\n<link rel=\"canonical\" href=\"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2012\/08\/business-report-boucher-12-12\/\" \/>\r\n<meta property=\"og:locale\" content=\"en_US\" \/>\r\n<meta property=\"og:type\" content=\"article\" \/>\r\n<meta property=\"og:title\" content=\"Business Report: The Time Is Now For A Retirement Plan - 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